AST SpaceMobile Hit a 52-Week Low Days After SpaceX Spent $8 Billion on Spectrum. That's Not a Coincidence.

AST SpaceMobile (NASDAQ: ASTS) sank to a 52-week low of $39.02 on Oct. 20, just 12 days after SpaceX (NASDAQ: SPCX) agreed to acquire Grain Management's nationwide 800 MHz low-band spectrum portfolio for $8 billion. Let's see why that announcement torpedoed AST's stock -- and why investors might be overreacting to the news.

Why did SpaceX's move crush AST's stock?

AST SpaceMobile develops low Earth orbit (LEO) satellites for direct-to-cell connections. Its top customers include AT&T (NYSE: T) and Verizon (NYSE: VZ), and its satellites expand their cellular networks to remote areas that their terrestrial towers can't reach.

Image source: Getty Images.

AST has launched 13 of its BlueBird satellites so far, but it can't deliver stable cellular connections and generate recurring commercial revenue until it expands that constellation to at least 45 satellites. It expects to reach that target by early 2027, and gradually expand its constellation to 248 satellites over the long term. In addition to AT&T and Verizon, AST is working with dozens of other carriers to reach over 3 billion wireless subscribers worldwide.

In the past, AST and its clients didn't directly compete against SpaceX, which provided first-party satellite internet and broadband services through Starlink. But satellite signals can't penetrate walls and windows very easily, so Starlink relies on mid-band spectrum partners like T-Mobile (NASDAQ: TMUS) to reach those indoor dead zones.

By purchasing Grain's 800 MHz spectrum -- which previously belonged to T-Mobile -- and combining it with a constellation of over 10,000 active satellites (which are smaller than AST's satellite arrays), Starlink can evolve into a fully independent wireless carrier. That could spell trouble for AT&T and Verizon's slower-moving plans with AST SpaceMobile.

Why was that sell-off an overreaction?

It made sense for AT&T and Verizon to get crushed by the news, but AST's decline is less rational. If AT&T, Verizon, and other carriers want to counter Starlink's latest move, they'll need to ramp up their spending on AST SpaceMobile's BlueBird satellites. They could also increase their investments in the company to accelerate those efforts.

Moreover, SpaceX isn't positioning Starlink as a competitor to AST. Instead, it will likely drive more carriers to partner with AST to expand their own satellite networks.

Therefore, I think AST's pullback was mainly due to overheated valuations rather than an existential threat to its business. Even after its recent decline, it still trades at 74 times this year's sales and 21 times next year's sales.

Analysts still expect AST's revenue to surge from $168 million in 2026 to $1.73 billion in 2028. If you believe it can hit those targets as it expands its constellation and gains new partners, it might be smarter to accumulate this volatile stock rather than sell the news.

Leo Sun has positions in Verizon Communications. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.