AST SpaceMobile (NASDAQ:ASTS) is one of the most intriguing special purpose acquisition companies (SPACs) out there. The company recently merged with New Providence Acquisition and shares changed from the NPA ticker to ASTS stock earlier this year.
Of course, ASTS stock got caught in the general SPAC malaise; shares fell from $25 to as low as the $7 level at one point. However, AST SpaceMobile is now on a solid upswing, with shares back around the $11 mark. There’s good reason for that.
While a lot of SPACs have fallen on hard times, ASTS has both the scientific chops and commercial partnerships to disrupt a massive market: mobile communications. Essentially, AST SpaceMobile intends to stream fast internet to cell phones worldwide.
ASTS Stock: A New Global Satellite Network
No one could accuse AST SpaceMobile of aiming small. The company intends to offer satellite-based internet at broadband speeds to the entire world.
That’s right, ASTS says there will be no coverage gaps anywhere. Furthermore, its technology will be compatible with “standard smartphones,” thus offering a potential market of 5 billion devices. This is without any added adapters, hardware, applications or other modifications to the phone either.
True, this might not seem like a big deal to people that live in big cities with always-on 4G or 5G data connections. But try living in rural America — or even less developed parts of the world — and access to high-speed internet can be hit or miss.
The “no gaps” part of the service is particularly important. AST SpaceMobile could find a large opportunity in markets such as emergency response, shipping, oil and gas, mining and other industries where workers are often far from major population centers. If, say, a rescue worker is pulling a skier out of an avalanche, the mobile connection to call a nearby medical helicopter has to be 100% reliable. This is the kind of dependability the company is attempting to offer.
Will It Work?
The big question with this sort of investment is whether or not the business plan is practical. Particularly in the SPAC space, we’ve seen tons of companies offer huge promises and then fail to deliver. AST SpaceMobile has a grand vision, but is it realistic?
There are a lot of signs in AST SpaceMobile’s favor. The company has secured more than 1,000 patents, for example. This puts it in a different league from your average electric vehicle (EV) SPAC with just a couple of prototypes. AST SpaceMobile has extensive technology and has demonstrated that it works for 4G with its BlueWalker launch. Deutsche Bank slapped an ambitious $35 price target on ASTS stock given its strong intellectual property and partnerships.
To the second point, arguably the biggest risk is competition. Even if the technology works seamlessly, AST SpaceMobile could still fail. We’ve seen other satellite networks offering mobile communications before. They’ve had a mixed record in terms of profitability. In part, that’s because established mobile carriers don’t want to give up market share. Even if the satellite internet is better in terms of service, the local carriers have a lot of levers to keep customers loyal to their own tower-based offerings.
AST SpaceMobile appears to have planned for this, however. For example, AST has partnerships with the likes of Vodafone (NASDAQ:VOD), Samsung, American Tower (NYSE:AMT) and AT&T (NYSE:T). In some cases, these companies even own equity in the company. Thus, AST seems to be going for a situation where it can have a mutually beneficial relationship with the phone companies rather than simply trying to steal their revenue. To that point, AST highlights 1.3 billion potential customers for its service once its telecom partners start offering it to their existing users.
The ASTS Stock Verdict
Investors have gotten burned on companies promising huge things with satellites before. As such, it’s understandable that folks aren’t rushing into ASTS stock just yet. Most people will probably wait until the company starts launching a large number of satellites and gets service going before buying into the story. At that point, AST SpaceMobile will have less risk.
That said, this looks like a company that could have truly gargantuan upside if things go right. The company has the patents and the partnerships to suggest that there’s a real shot at success here. So, if you’re looking for a moonshot stock, ASTS checks the right boxes.
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On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.