The stock is up over 1,000% in the last six months.
Shares of AST SpaceMobile (ASTS -3.75%) were up as much as 20% this week before falling, according to data from S&P Global Market Intelligence. The satellite broadband company has been on a tear this year, up over 1,000% in the last six months alone. Investors are optimistic about the start-up’s potential to disrupt the cellular broadband market and its huge addressable revenue opportunity.
Here’s why the pre-revenue start-up AST SpaceMobile was volatile yet again this week.
Global cellular broadband network
In the last few months, there has been a ton of momentum with AST SpaceMobile stock. The company announced it is slated to launch its first satellites in September, partnering with AT&T and Verizon to get coverage in the United States. Pitched as a competitor to SpaceX’s Starlink, AST SpaceMobile wants to enhance global internet connectivity in places around the world where billions still lack strong internet speeds. It is beginning in pockets in the United States where traditional cellular towers are lacking.
Investors are bullish on the company’s potential due to this huge addressable market (people pay a lot for internet access) and that it’s in a hot sector. In fact, the stock now has a market cap of $8.8 billion but has never generated any revenue. Through the first six months of this year, it has spent $120 million on operating expenses, which shows how fast it needs to scale up revenue to reach profitability.
Luckily, it will have some of the big cellular companies as partners for this roll-out, but pre-revenue stocks in hot sectors are always volatile. Don’t be surprised if AST SpaceMobile stock keeps going on wild rides each week for the time being.
Stay cautious with this high-priced stock
AST SpaceMobile believes there are billions of potential customers for its products around the world. While that may be true, it has zero customers today and has not proven its network actually works properly. For that reason, the stock is incredibly risky for investors.
A market cap close to $10 billion for a pre-revenue company is unrealistic. This is what got investors in trouble in 2020 and 2021 and caused them to lose the majority of their wealth. AST SpaceMobile could be headed down the same path if investors aren’t careful. It is true that the stock is soaring today, but the company still has to hit a ton of operational milestones in the near future before reaching positive profitability. It is not guaranteed that they will get past these hurdles.
For these reasons, smart investors will stay far away from AST SpaceMobile stock right now.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
