As the U.S. stock market rebounds, with the S&P 500 Index ($SPX) rallying 4.5% over the last five days alone, optimism is building - and recession fears are fading. In fact, Goldman Sachs (GS) just lowered the odds of a U.S. recession to start this week, “mainly because the data for July and early August released since August 2 shows no sign of recession,” wrote the bank's chief economist in a Sunday note.
With the odds for a soft landing on the rise, this renewed investor confidence is also spilling back into more speculative areas of the market - including space stocks, which are rapidly transitioning from niche investments into high-growth opportunities. The commercial space industry is booming in 2024, thanks in large part to privately owned ventures from billionaires like Jeff Bezos and Elon Musk, which are driving advancements that expand travel, exploration, industrial, communications, and defense applications well beyond Earth's orbit.
AST SpaceMobile (ASTS) is one publicly traded player in the space industry, best known for its space-based cellular broadband network. The company has recently gained significant attention among market watchers, as its stock has soared by more than 847% in the last 52 weeks, including today's 17.5% rally.
With the shares up more than 500% so far in 2024, and trading just about 1% from their newly set record high of $37.22, is it still a good time to scoop up shares of ASTS for more upside?
About AST SpaceMobile Stock
Based in Texas and founded in 2017, AST SpaceMobile (ASTS) aims to build a space-based broadband network for smartphones in the United States. The company offers cellular broadband services to end users who seek service beyond terrestrial coverage. AST currently boasts a market cap of $7.9 billion.
AST recently confirmed its first commercial satellite launch in September, with the seven-day launch window slated to open Sept. 11. Investors have pushed the space stock sharply higher ahead of the event, with ASTS up more than 700% in the past three months alone.
AST Beats Earning Estimate in Q2
On Aug. 15, the company announced its Q2 results, along with an update on its planned Bluebird satellite launch. As a result, AST SpaceMobile soared over 50% last Thursday, driven by investor excitement over the operational readiness of their first commercial satellites and a positive update on its cash position.
AST SpaceMobile reported $0.9 million in revenue, nearly doubling from the prior quarter and exceeding Wall Street's estimates by $25,000. This growth reflects the company's momentum as it makes strides in securing commercial agreements and continues to roll out its space-based cellular broadband services.
Moreover, the company ended the quarter with $287.5 million in cash and cash equivalents, up from $212.4 million in Q1 and much improved from $191.4 million in the year-ago period.
“We are funded to achieve our near-term goals and reach initial revenue,” said CEO Abel Avellan. "Our business is now accelerating."
Looking ahead, analysts are forecasting exponential revenue growth for ASTS to $141.7 million in fiscal year 2025, with the space company expected to achieve profitability in fiscal 2027.
A Major Milestone for ASTS
The Bluebirds are driving excitement because they're a critical part of AST SpaceMobile's ultimate strategy to build a space-based direct-to-cellular broadband network with 100% U.S. coverage. The satellites have arrived at Cape Canaveral, and are awaiting their launch via Falcon 9 in September.
The BlueBird satellites represent a significant technological leap, featuring the largest-ever commercial communications arrays deployed in low Earth orbit (LEO). Beta testing among initial users on the AT&T (T) and Verizon (VZ) networks is expected to begin within months of the launch, and ASTS has also landed key investments from Alphabet's Google (GOOGL) division, Vodafone (VOD), and the U.S. government.
What Do Analysts Say About ASTS Stock?
The recent Q2 release and update on the satellite launch triggered some bullish notes from analysts, but ASTS stock has still outrun Wall Street's 12-month price target by a wide margin.
All five analysts covering the stock unanimously rate it as a “strong buy.” However, the average 12-month price target is $21.18, with ASTS trading at a premium to even the Street-high price target of $30 at current levels.
That $30 high-water mark is courtesy of UBS, which last week raised its price target on ASTS along with its revenue forecast.
"We still see ASTS as a high-risk, high-reward investment. That said, initial U.S. regulatory approval, the imminent launch of its first commercial satellites, and partner/funding progress add to our conviction," wrote UBS in a note to clients.
Among other brokerage firms, Scotiabank recently boosted its ASTS price target to $28 from $21.10, while B. Riley raised its target to $26 from $15.
Currently, ASTS is trading at a premium of roughly 72% to Wall Street's average price target.
The Bottom Line on ASTS Stock
In my opinion, ASTS stock appears significantly overvalued at this point, and it's likely that at least some of the recent gains might be driven more by hype than by fundamentals. Despite this, the company has several growth drivers that could scale the business significantly in the future. For investors who believe in the long-term thesis, watch for a potential “sell the news" pullback following the September launch event, which could set up a dip-buying opportunity to pick up shares at a relative discount.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
