Amid a soft start to the week on Wall Street, global cellular broadband network provider AST SpaceMobile (NASDAQ:ASTS) jumped dramatically higher, gaining nearly 12% in the late afternoon hours. The company, the first of its kind to operate directly with standard, unmodified mobile devices, inked a partnership with communications specialist Fairwinds Technologies. Though ASTS enjoys significant credibility within the burgeoning space economy, it still faces notable hurdles.
According to the accompanying press release, AST SpaceMobile announced a teaming agreement with Fairwinds to “explore potential opportunities to jointly market AST SpaceMobile’s planned services and innovative satellite technologies to the military market.” Fairwinds develops advanced end-to-end communications solutions for military operators and public sector agencies.
Per the release, military forces need high bandwidth, low latency and secure communications to conduct their operations. However, they often operate in areas without existing, trusted cellular coverage. That’s a gap that the AST-Fairwinds partnership could potentially close, driving immense relevancy for ASTS stock.
“Our space-based cellular broadband network is being designed to offer new capabilities, including potential applications for the Tactical Military Communications mission scope, which could offer a next-generation, resilient alternative to existing technologies,” stated AST’s Chief Commercial Officer Chris Ivory.
In turn, Tim Hillner, chief technology officer of Fairwinds Technologies, remarked, “[f]ocusing on next-generation and space-based communications technologies that address network resiliency, 4G/5G competitiveness and Positioning, Navigation and Timing (PNT) is vital. AST SpaceMobile’s network is being designed to offer potential solutions for these needs.”
Opportunities Abound for ASTS Stock, But So Do Risks
According to AST’s corporate ethos, its mission is to “eliminate the connectivity gaps faced by today’s five billion mobile subscribers and finally bring broadband to the billions who remain unconnected.” Essentially, then, this latest deal represents a baptism by fire for ASTS stock. If the company can forward military-resilient solutions, it can easily address the less-rigorous needs of everyday civilians.
As well, ASTS stock may be a downwind beneficiary of the present geopolitical climate. With a war in Europe and simmering tensions with China, the U.S. cannot afford to be naïve about the possibility of future hot conflicts. Therefore, dominating space-based communication infrastructures appears a no-brainer.
At the same time, while major institutions pontificate about the trillions of dollars that the space economy can generate in the decades ahead, the reality rings a more mundane tone. As appealing as the sector is, it just hasn’t generated consistent winners.
For instance, the debut of Virgin Galactic (NYSE:SPCE) generated considerable buzz, at one point commanding over $50 a share. Today, it trades hands at a little over five bucks. Since its public market debut as a special purpose acquisition company (SPAC), it has slipped 47%.
Another space economy participant that looks good scientifically but not so great on the charts is Rocket Lab (NASDAQ:RKLB). In the trailing year, RKLB dropped 47% of its equity value. And since making its debut (also as a SPAC), it fell more than 55%.
For ASTS stock, it’s the same story. True, since the January opener, it’s off to a monstrous trajectory, returning more than 56%. However, ASTS remains down roughly 29% against its initial offering price.
Why It Matters
Although no one in the past 90 days has covered ASTS stock, historically, it has enjoyed a strong buy consensus. Also, the analysts’ average price target stood at $20.67. Hitting that right now would imply a near-tripling of market value.
On the date of publication, Josh Enomoto 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.