In a column published on May 21, I stated that, in my view, “AST SpaceMobile (ASTS) was one of the best midsize defense stocks to buy.”
Between May 21 and June 27, ASTS surged by 125%. Nevertheless, given additional, strong, positive, potential catalysts for the company that I’ve identified since I wrote my last column, I continue to be very bullish on the name and still recommend that long-term growth investors buy the stock.
Among these potential new catalysts for AST are widespread adoption by developing countries, increased cooperation with and a potential investment by Jeff Bezos’ companies, and meaningful revenue for AST from the Golden Dome initiative.
As I noted in the previous article, “AST has developed a space-based cellular broadband network that can provide coverage to everyday consumer smartphones.”
Possible Widespread Adoption by Developing Countries
On June 18, AST SpaceMobile and Vi, described in the joint press release as “India’s leading telecom service provider,” announced that they had launched “a strategic partnership to expand mobile connectivity across India’s unconnected regions.”
The companies added that, “While there is widespread 4G and emerging 5G coverage, satellite communication will complement terrestrial connectivity to further expand broadband cellular access in some challenging terrains where deployment of terrestrial mobile infrastructure might be difficult.”
According to one report, “More than 2.5 billion people globally still lack internet access.” Moreover, “large swaths of the world’s population still don’t have access to mobile internet primarily because of affordability.” In Bangladesh, Nigeria, and Pakistan, for example, just 37%, 34%, and 24% of the citizens have mobile internet.
AST’s deal with Vi makes me believe that AST can profitably provide mobile internet to developing nations. And since many consumers in a large number of these countries likely lack internet coverage and providing broadband service using AST’s satellites would probably be way easier and cheaper than doing so using conventional means, AST should be able to easily make many deals with these nations’ telecom companies.
Potential Investments From Bezos’ Firms and Golden Dome
In early June, AST board member Adriana Cisneros’ Instagram account featured a picture of former Amazon (AMZN) CEO Jeff Bezos with AST’s CEO, Abel Avellan, and Cisneros. In the wake of Cisneros’ post, Scotiabank analyst Andres Coello wrote, “Could Jeff Bezos become an ASTS investor? This is a possibility widely discussed by investors and analysts, in no small measure because Bezos is one of the world’s top space investors.”
I believe that Bezos or his company, Blue Origin, could indeed invest in AST, given the latter company’s huge potential and the fact that AST has already obtained rockets from Blue Origin for its satellites. Such an investment would likely ensure that AST keeps buying rockets from Blue Origin.
What’s more, Amazon could invest in AST in order to guarantee access to AST’s satellites and its broadband technology. These systems would likely enable Amazon to deploy its Project Kuiper initiative more quickly while greatly increasing the amount of revenue that it can generate.
In light of the tremendous potential of AST’s technology, I also would not be surprised if AMZN eventually decides to buy AST for as much as $80 billion in a combination of cash and stock.
On the Golden Dome front, Avellan, during AST’s last earnings call, stated that, “We really think that we are very well positioned with our technology to be an important contributor to the actual goals outlined in the Golden Dome. We think the size and power satellites are unique and completely differentiated of what can be done by industry or by our adversaries. And we think that our technology will enable applications for national security that are going to be important for this particular program.”
With the Trump administration planning to spend $175 billion over three years on the Golden Dome, I believe there is a good chance that AST’s revenues from the project will meaningfully boost its profits and shares.
Valuation and the Bottom Line on AST
As I pointed out in the prior column, “Alphabet (GOOG, GOOGL), Verizon (VZ), and Vodafone (VOD) have all invested in AST,” while VOD, the gigantic UK-based telecom company, looks poised to utilize AST’s technology in many if not most of its markets. Moreover, a Japanese telecom company, Rakuten, intends to utilize the system and Vi plans to deploy it in India. Clearly, AST looks quite well-positioned to generate a great deal of revenue from both developed and developing markets.
And when it comes to projects with the Pentagon, in addition to AST’s potential revenue from the Golden Dome, the firm has been included in the Defense Department’s “Proliferated Low Earth Orbit (PLEO) Satellite-Based Services” program. The initiative has a budget of $13 billion, and AST is one of 20 suppliers for it.
In light of all of these points and the possibility of investments in AST by Amazon and/or Blue Origin, along with a potential acquisition by AMZN, the current market capitalization of ASTS looks quite low. Indeed, I believe that the company’s market capitalization can easily reach $100 billion within four or five years. If that occurs, the shares would jump nearly six times versus their current levels.
*This article is intended to be informational only; it is not financial advice.
