Editor’s note: This article was updated on March 10 to correct Elon Musk’s role with Tesla (NASDAQ:TSLA).
Last week, Elon Musk extended use of Starlink satellites to help Ukrainian citizens stay connected to the internet. This morning brought the news that SpaceX has reached a multi-launch agreement to partner with AST SpaceMobile (NASDAQ:ASTS), a company building a space-based cellular broadband network. Since the deal was announced, ASTS stock has skyrocketed.
What’s Happening With ASTS Stock
It makes sense that AST & Science, SpaceMobile’s parent company, deals with space. News of the SpaceX deal has sent ASTS stock shooting up sharply. After a month of little growth and ultimate declines, shares surged this morning. As of this writing, ASTS is up more than 31% and shows no signs of slowing down.
It’s hardly unexpected that partnering with an industry-leading company owned by Musk would help drive growth for a small-cap name such as ASTS stock. However, this type of deal requires a closer look, specifically at what it means for the space tech field.
Why It Matters
Musk may be best known for leading Tesla (NASDAQ:TSLA), but he has always had an eye on the skies. Data from market research platform Quiver Quantitative indicates that he is deeply interested in companies with ties to the aerospace field. Now, the crisis in Ukraine has helped shine a new light on the importance of space technology due to its global connectivity power. SpaceX is likely to redouble its focus on developing exactly that type of tech.
That’s where SpaceMobile comes in. The company aims to provide connectivity at 4G and 5G speeds for the entire planet, including on land, at sea and in the air. It also stresses that this will not require any investment in expensive hardware from consumers.
It certainly makes sense that SpaceX would seize the opportunity to be part of such a mission. According to a statement released by SpaceMobile, the agreement between them covers the upcoming BlueWalker 3 test satellite (BW3) launch as well as the first BlueBird satellite. It also provides a “framework for future launches.” Founder, Chairman and CEO Abel Avellan describes the agreement as a “key step” forward for the company.
The global implications of such a platform being built should not be ignored. SpaceMobile focuses on using space tech to eliminate global connectivity gaps. It took a war outbreak for most of the world to see the necessity of this type of network. However, its utility is by no means limited to times of turbulence. We may be about to see a little-known company usher in new standards for how the world stays connected.
What It Means
As the planned satellites begin to launch, ASTS stock has the potential to rise significantly. For investors eyeing space stocks, it is absolutely worth watching as the launches draw near. Shares are likely to rise after the first satellite launch, scheduled for summer 2022.
So far, ASTS stock remains relatively undervalued. If Musk sees potential in the company, the rest of the world should pay attention.
On the date of publication, Samuel O’Brient 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.