Why AST SpaceMobile Stock Jumped 64% in October

The share price of AST SpaceMobile (NASDAQ: ASTS), a development-stage maker of satellites used to deliver broadband, was surging last month on a combination of momentum leading into October, after it said it completed assembly of its Bluebird 6 satellite, and as it signed a new deal with Verizon Communications.

By the end of the month, the stock price was up 64%, according to data from S&P Global Market Intelligence. As you can see from the chart below, the stock jumped through the first half of the month before giving back some of those gains in the second half of October.

Data by YCharts.

AST Spacemobile takes flight

The biggest news out on AST Spacemobile last month may have actually come in after hours on Sept. 30, pushing the stock up 16% on Oct. 1 and another 16% the following day on high volume.

The news that sparked that rally was an after-hours announcement from AST that its BlueBird 6 satellite had finished final assembly and testing and was ready for flight.

The company also said it expected to have 45-60 satellites in orbit by the end of 2026.

Image source: AST Spacemobile.

From there, the stock continued to climb over the next several sessions, even as it announced an equity distribution program to sell up to $800 million of stock from time to time through at-the-market offerings. The stock fell briefly on Oct. 7, but recovered to finish higher.

The following day, the company announced an agreement with Verizon to provide direct-to-cellular AST SpaceMobile for Verizon customers starting in 2026.

The stock peaked on Oct. 15, and then sharply retreated as Barclays double-downgraded the stock on Oct. 17, lowering its rating from overweight to underweight and calling the valuation "excessive," though it did call direct-to-cellular an attractive opportunity.

On Oct. 22, the stock dipped 9.2% as it sold $1 billion in convertible debt, showing it still needs cash, and the move could potentially dilute existing shareholders.

Finally, AST closed out the month with a price target hike to $95 from B. Riley, and a 10-year commercial agreement with STC Group to provide direct-to-device satellite connectivity across Saudi Arabia and other regional markets.

What's next for AST Spacemobile

AST Spacemobile currently has a market cap of $25.7 billion, though the company has yet to generate material revenue, posting just $4.9 million in revenue in the last four quarters.

That's expected to change in the second half of next year as the company begins to commercialize its satellites, but the critiques about the stock's valuation seem fair at this point. It will take AST years to grow into a valuation of $25 billion as the analyst consensus only calls for $255 million in revenue next year.

It's also worth noting that the customers it serves, like Verizon, are low-valuation businesses. Verizon earns about $20 billion in profit, but has a market cap of just $166 billion.

While companies like AST and Elon Musk's Starlink are innovating new ways to deliver broadband, broadband demand is a mature category, which is why Verizon trades at a price-to-earnings ratio of just 8.

Ultimately, AST's addressable market by not be as large as investors seem to think. Pumping the brakes on the stock makes sense at this point.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Barclays Plc and Verizon Communications. The Motley Fool has a disclosure policy.