Why AST SpaceMobile Keeps Gaining
Key Points
AST SpaceMobile confirmed its three newest BlueBird satellites are operational in orbit following their June 17 SpaceX launch, with production already underway on BlueBird 37.
The company recently announced a joint venture with Rakuten to bring direct-to-phone satellite service to Japan, expanding its international footprint.
Despite the positive momentum, AST remains unprofitable with significant execution risk, and its current valuation is too rich.
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AST SpaceMobile (NASDAQ: ASTS) stock jumped 17.7% as of 2:30 p.m. ET on Monday. The S&P 500 and the Nasdaq Composite were up 1.6% and 1.9%, respectively.
The company, which delivers broadband to cellphones from space, is seeing shares rally after it confirmed its newest satellites are alive and functioning.
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BlueBird satellites are up and running
Over the weekend, AST said on X that its newest three satellites -- BlueBird 8, 9, and 10 -- are in orbit and operating normally. The satellites were launched on June 17 aboard a SpaceX Falcon 9 rocket. AST also confirmed that it has reached production on BlueBird 37.
The positive news comes after the recent announcement of a new joint venture with Rakuten to offer direct-to-phone service in Japan, further expanding AST's reach outside of the U.S.
Short sellers add fuel to the rally
The stock got an extra boost due to heavy short-selling. When a heavily shorted name climbs on good news, the effect can be amplified as short sellers are forced to buy additional shares to maintain their positions.
Source: Getty Images
Why I'm staying on the sidelines
AST brought in $14.7 million last quarter and is currently sitting on roughly $3.1 billion in cash. It's still operating deep in the red, and although that looks like a strong balance sheet, it only gives a few years of runway at current rates.
As much as AST is doing something that could prove to be a huge success, not only is there serious execution risk, even if it delivers, its current valuation just doesn't make sense. I would avoid buying in at current levels.
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Johnny Rice 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.
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