The next 12 months will be pivotal for AST SpaceMobile, as it gears up to start offering the service it plans to sell more broadly.
AST SpaceMobile (ASTS 4.95%) has satellites sitting at Kennedy Space Center in Florida ready for the launch pad. It is about to take a giant leap, hopefully sometime in September, that will change it from a company trying to prove it can operate a business to one that has the capability of actually doing so. The next year will be a vital turning point in many ways, but investors need to understand that not much will change for AST in the short term regarding financial performance.
AST SpaceMobile is taking one small step
Kennedy Space Center is used to launching large objects into space, so the five AST SpaceMobile satellites waiting to be put into orbit aren’t a big deal in some ways. However, a successful launch will be a game-changing event for AST SpaceMobile. Today the company has one functioning test satellite, which helped it prove its space-based mobile broadband network was viable. After the next launch, AST SpaceMobile will have the parts in place to “launch” its service.
Image source: Getty Images.
Although this is huge, there’s another aspect of the recent news flow that has to be examined as well. AST SpaceMobile’s plan has always been to provide its services to multiple cellular providers. And, to that end, it has signed up both AT&T (T -0.30%) and Verizon Communications (VZ -0.58%) as investors and partners. The test satellite was vital in this effort, but so, too, was the company’s ability to build the first five satellites now waiting to go into orbit.
So, in the next month or so, AST SpaceMobile will have enough satellites in space to offer a limited service. Of course, this isn’t likely to be as simple as turning on a light switch. So there will probably be a months-long period of testing and configuring. But in the next year, the company is likely to go from a big idea to a reality.
The reality is that AST SpaceMobile isn’t profitable
While it would be a mistake to underestimate the importance of what is about to take place for AST SpaceMobile, it is equally important to not overstate what is happening. In the second quarter of 2024, AST SpaceMobile lost $0.51 per share, up from a loss of $0.24 a year earlier. But here’s the interesting thing — the company brought in $900,000 in revenue in the second quarter of 2024 and none in the first quarter of 2023.
The increased loss, despite starting to generate revenue, has to do with the ramp-up that’s taking place as the company goes from testing its concept to trying to build out a functioning space-based mobile cellular platform. So, even as AST SpaceMobile creates the foundation of the network it needs to sell its service, investors should expect the red ink to continue flowing on the earnings statement.
The big problem here is that five satellites are a drop in the bucket. AST SpaceMobile’s medium-term plans call for building another 20 satellites, an effort that it estimates could cost as much as $400 million. That’s roughly $20 million per satellite! it seems likely that the red ink is going to keep flowing heavily for the foreseeable future, especially over the next year.
ASTS data by YCharts
But wait, there’s likely to be even more red ink after that. AST SpaceMobile’s long-term plan isn’t to have 25 satellites; it is to have 95. So it isn’t really looking to build 20, but looking to build 90. Some quick math suggests that building all 90 satellites could cost around $1.8 billion (or more if inflation increases the price tag over time).
AST SpaceMobile: A giant leap forward, but not a huge change in trajectory
The next year will be hugely important for AST SpaceMobile from an operations standpoint. The rubber is really hitting the road, and it is happening right now. That helps explain the excitement around the stock of late, which itself has rocketed skyward. But investors need to go in understanding that there is a lot (a lot!) of money that still has to be spent before this company is going to have a fully functioning and profitable business. AST SpaceMobile remains a high-risk investment.
