AST SpaceMobile (NASDAQ:ASTS) stock has a lot of upside and an incredible long-term growth runway despite the elevated investment risk.
The company is on a mission to make every cell phone a satellite phone. Its ambitious plan involves deploying satellites to provide high-speed cellular coverage from virtually anywhere on the map.
ASTS plans to disrupt the telecoms sector with its technology and transform the broadband wireless industry.
AST SpaceMobile completed its merger with shell company New Providence back in April. ASTS had laid down plans to merge with SPAC New Providence last year. However, since then, ASTS stock has moved sluggishly, trading close to its opening day price of $11.39.
With no satellites in orbit yet and the growing competition in the sector, there are clear risks to investing in ASTS stock.
However, to quote British megabank Barclays, “if the technology works as planned and management executes, we see a compelling investment opportunity.”
Serving the Underserved
The global pandemic has transformed internet connectivity into an essential utility. With social distancing measures in place, the need for robust cellular connectivity supporting advanced technologies has become imperative. This is achievable for the developed world, but that isn’t the case for the majority of the planet.
ASTS plans to deploy its initial fleet of 170 low-orbit satellites to cover 51% of the global population without mobile broadband. BlueWalker 3 satellite can communicate directly with mobile phones using 3GPP standard frequencies, an industry standard for 5G.
Another positive for ASTS has been its ability to partner with some of the top companies in its industry. American Tower (NYSE:AMT), an independent tower operator working in the U.S. and 22 other markets, is one of them.
AMT essentially builds towers that are used by mobile network operators (MNOs) to provide cellular services. The company has been building its towers in a variety of locations which can be rather challenging.
AMT’s rationale behind investing in ASTS is that ASTS’s business could essentially become an extension of its own. Moreover, MNOs would then become a common customer base.
Moreover, in December 2020, ASTS announced a partnership with telecom giant Vodafone (NASDAQ:VOD).
The companies will launch the initial phase of space-based commercial mobile communications service in 2023. The first phase involves using 20 satellites which will offer low-latency connectivity to roughly 1.6 billion people.
AMT’s Chief Technology Officer Ed Knapp believes that ASTS is head and shoulders above its competition for wireless to connect directly with broadband.
Once the network is in full effect, it will help bring robust internet connectivity to more than 50% of the world’s population. Moreover, its revenue-sharing model with MNOs and having AMT as its infrastructure partner are some major positives.
In supporting the first phase commercial launch of its network, it has secured $462 million in funding. The funds are enough for its operational and capital expenditure requirements of $25.1 million and $54.3 million, respectively.
Approximately $51.7 million has been invested in developing the BW3, and an additional $14 million to $16 million will be incurred for components and launch.
Final Word on ASTS Stock
ASTS stock hasn’t been able to gain momentum since going public back in April. However, with multiple growth catalysts ahead and recent positive developments, the stock will start to build a decent head of steam.
According to some analysts, it’s trading at more than a 170% discount to its average price target. Naturally, these estimates are on a long-term basis when the company can achieve most of its goals.
With the ability to tap into a $1 trillion market opportunity and its competitive advantages over its peers, ASTS stock is a great long-term play in the fast-growing space sector.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.