Why Did AST SpaceMobile Stock Slip in April?

Shares of AST SpaceMobile (NASDAQ: ASTS) dropped 10.8% in April, according to data from S&P Global Market Intelligence. Even though the rest of the space economy stocks have been soaring ahead of a SpaceX IPO, AST SpaceMobile is increasingly facing bearish sentiment due to a recent Blue Origin launch failure, heavy insider selling, and encroaching competition from SpaceX.

The company generates barely any revenue and yet has a market cap of $27.5 billion. Here's why AST SpaceMobile fell in April, and whether now is the time to buy the dip.

De-orbiting mistake and launch risks

AST SpaceMobile is building a network of large satellites that can beam high-speed internet directly to mobile devices. This has never been done before on this scale, and could prove quite innovative if it can get a working network for millions of customers to use.

To get these ultra-large satellites into orbit, AST SpaceMobile is relying on launch partners. In April, Blue Origin launched an AST SpaceMobile satellite on the wrong trajectory into orbit, forcing them to scrap the expensive satellite and setting the company behind in scaling up to deploy the network. This is the main reason the stock fell last month.

What's more, there have been significant insider sales by executives, including the founder of Rakuten, Hiroshi Mikitani, who sold $271 million worth of stock in the middle of the month. To pile on, SpaceX has begun work to get regulatory approval for direct-to-device internet connectivity for its Starlink satellite internet service, bringing increased competition for AST SpaceMobile.

Image source: Getty Images.

Time to buy the dip?

The ultra-enthusiastic bulls for AST SpaceMobile claim that the direct-to-device internet capabilities will revolutionize connectivity, leading to tens of millions of customers signing up through the company's telecommunications partners.

Shares of AST SpaceMobile are up 700% in the last five years on this enthusiasm. However, it looks like much of this potential growth is already priced in. At a market cap of $27.5 billion, AST SpaceMobile stock is trading as if it were already generating billions in revenue. It only generated $71 million last year. On top of this, the company is burning a lot of cash, with free cash flow of negative $1.1 billion over the last twelve months in order to manufacture its satellites to get into orbit.

AST SpaceMobile may win the race to satellite connectivity, but even if it does, the stock is likely to disappoint investors going forward. If it loses out to Starlink and other competitors, the stock has a lot further to fall from here.

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.