Prediction: This Stock Could Soar When SpaceX's S-1 Drops
Key Points
SpaceX's IPO could be the biggest in history, with the company targeting a valuation of up to $2 trillion.
Other space stocks could benefit from the attention on the industry.
AST SpaceMobile is just starting to commercialize its business and has signed on a number of major telecoms.
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SpaceX is preparing to go public, and it could be the biggest IPO in history.
Elon Musk's space company filed confidentially to go public last week, and SpaceX is reportedly targeting a valuation of as much as $2 trillion and could raise $75 billion from the offering.
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The company is more than just rockets. SpaceX owns the Starlink satellite broadband business, as well as the social media site X and xAI, following the merger between SpaceX and xAI in February, which valued the combined company at $1.25 billion. Elon Musk has big plans for SpaceX's future as well, including sending data centers into space and eventually reaching Mars.
Investors can't buy shares of SpaceX on the open market yet, though there are ways to get exposure to the company.
However, SpaceX's entry into the public market is likely to shake up other stocks in the space industry and beyond, meaning there could be opportunities for investors before the stock hits the trading floor.
One stock that could be a winner is AST SpaceMobile (NASDAQ: ASTS), and it could get a tailwind as soon as SpaceX's S-1 prospectus comes out, which is expected later in April or early May.
Image source: AST SpaceMobile.
Why AST SpaceMobile could be a winner
AST SpaceMobile is one of the biggest publicly traded satellite broadband companies by market cap, and it's just getting ready to commercialize its business.
The company is planning to put 45 to 60 of its Bluebird satellites into orbit this year, and it specializes in direct-to-device cellular broadband service for standard smartphones, making it a direct competitor to Starlink.
I don't expect AST to catch up to Starlink, which is the leader in satellite broadband, but it doesn't have to. Instead, I think there's a good chance that SpaceX's debut will create a halo effect for other satellite broadband companies like AST, sparking investor interest in the sector as they get a clearer view of how big the potential market is.
It could also make it easier for AST to raise capital through the equity and debt markets as SpaceX establishes a precedent for its peers.
What we might learn from SpaceX's S-1
SpaceX hasn't publicly released any formal financial reports, but some of its numbers have been reported in the media. According to Reuters, the company brought in $15 billion-$16 billion in revenue last year, the vast majority of that coming from Starlink, and around $8 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA).
In other words, Starlink is the anchor of the company's $2 trillion valuation, meaning it's trading at a huge multiple based on its results. In the filing, SpaceX is likely to hype all aspects of its business, and that includes Starlink. Investors will get a better sense of where Musk & co. see the satellite broadband industry going and what they think is possible for it in the filing. It will also shed further light on Starlink's financial performance and prospects.
While investor reaction to SpaceX's S-1 will depend on the numbers, the document is intended to sell shares of the company to investors by design, and management is likely to hype the opportunity in front of it.
Can AST take advantage?
AST appears to be in the best position to take advantage of any additional investor interest in the satellite broadband industry. It's already signed up major telecom partners, including Verizon, AT&T, Vodafone, Telus, and Japan's Rakuten, and its revenue, while still small, is expected to grow by triple digits this year and next.
AST is much smaller than Starlink, but it has some competitive advantages, including its partnership with major telecoms and the fact that consumers don't need any special hardware to use it, unlike Starlink, which requires a terminal dish.
AST now has an opportunity to take advantage of the investor interest in satellite broadband, and with its business just starting to gain momentum, the timing could be perfect.
We don't know when SpaceX will file its S-1, but if investor reaction to the report is positive, that could give a significant boost to AST SpaceMobile as well.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool recommends TELUS, Verizon Communications, and Vodafone Group Public. The Motley Fool has a disclosure policy.
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