Why AST SpaceMobile Stock Keeps Falling

Source Motley_fool

Key Points

  • Deutsche Bank thinks AST SpaceMobile stock is a buy.

  • Piper Sandler thinks it's not.

  • Which analyst is right? The answer probably depends on SpaceX.

  • 10 stocks we like better than AST SpaceMobile ›

AST SpaceMobile (NASDAQ:ASTS) stock enjoyed a brief pop Monday, gaining 1% before resuming its fall Tuesday. Credit for the pop goes to Deutsche Bank, which upgraded the satellite communications stock to "buy" after watching AST lose 65% of its market capitalization from May to October. As of 11:55 a.m. ET today, however, AST shares are down 9% -- and down nearly 26% over the past week.

And you can blame Piper Sandler for that -- because Piper thinks Deutsche is wrong about AST SpaceMobile.

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Solar-powered satellite orbiting Earth above North America

Image source: Getty Images.

What Deutsche says about AST SpaceMobile

Let's start with the bull case.

Deutsche Bank analyst Bryan Kraft thinks investors have overreacted to delays in AST's launch schedule, which prevented it from assembling its constellation in time to begin offering direct-to-cell service this year. After its steep decline, argues Kraft, "all but $10" of AST's stock price is backed up by the value of the cellphone spectrum AST owns.

As for the remaining $10, Kraft argues that Space Exploration Technologies' (NASDAQ:SPCX) move to build a satellite-based direct-to-cell network will push telecom companies away from SpaceX, and toward partnership with AST -- boosting AST's business and making AST stock a buy.

What Piper Sandler thinks about AST

Piper Sandler analyst Alexander Potter disagrees and downgraded AST stock to "neutral" today. Even if telcos want to partner with AST, that doesn't help if AST lacks satellites in orbit. And with Ariane, Blue Origin, and United Launch Alliance rockets all up on blocks, AST depends on SpaceX rockets to launch its satellites.

You can see the problem here.

AST SpaceMobile needs between 45 and 60 satellites to provide coverage across even just "select" markets. But it can't put them there unless SpaceX -- now its primary competitor -- permits it. That sounds more like a sell argument than a "buy" to me.

Should you buy stock in AST SpaceMobile right now?

Before you buy stock in AST SpaceMobile, consider this:

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Rich Smith 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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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