Why AST SpaceMobile Stock Fell 21.6% In June

Shares of AST SpaceMobile (NASDAQ: ASTS) slipped 21.6% in June, according to data from S&P Global Market Intelligence. The previous high-flying satellite internet disruptor has hit a roadblock after the IPO of Space Exploration Technologies (NASDAQ: SPCX) and its plans to compete with the company.

Here's why AST SpaceMobile stock fell in June, and whether it's worth buying the dip in July.

A race in satellite internet

AST SpaceMobile can be credited as one of the first companies to believe you could build a constellation of satellites that would directly connect mobile devices on Earth to the internet. SpaceX's Starlink service already has 10 million subscribers but requires upfront purchases of antenna terminals, making it less transportable for users.

The company that first delivers direct-to-device internet worldwide could have a significant first-mover advantage. Coming into this year, it looked like AST SpaceMobile had the lead, including its partnership with mobile communications providers in various wealthy countries like the United States, which is why investors had taken the stock to the moon.

However, developments so far this year have caused investors to hit the brakes. The company has delayed its roll-out of full service in the United States until 2027 after a setback with a Blue Origin launch. Every time AST SpaceMobile delays its commercial launch, it gives SpaceX more opportunity to compete and build its own direct-to-device service with Starlink.

SpaceX already has millions of subscribers, offers messaging services direct-to-device with Starlink, and just raised billions in its IPO to fund future growth. With its own rockets to send payloads into orbit, Starlink could quickly catch up and pass AST SpaceMobile with these direct-to-device ambitions. This is the main reason AST SpaceMobile's stock fell in June.

Image source: Getty Images.

Should you buy AST SpaceMobile stock?

The idea for direct-to-device satellite internet was fantastic, and you have to credit AST SpaceMobile for having this vision for the future. However, its ability to get from a standing start to global satellite internet coverage should be put into question.

AST SpaceMobile generates close to zero revenue today. It is currently burning over $1 billion in free cash flow a year, with further losses likely in the quarters ahead as more of its massive satellites are launched into orbit. At a market cap of $32.5 billion, much of AST SpaceMobile's future growth is already priced into its stock.

Competing with SpaceX is not going to be easy because the company has an advantage in getting payloads to orbit with its own rockets. This should make any investor nervous about buying the dip on AST SpaceMobile in July.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool has a disclosure policy.