Is AST SpaceMobile Stock a Millionaire Maker?

Over the past couple of decades, the space industry has transformed from being government-run to being dominated by the private sector. Companies like SpaceX and Rocket Lab USA provide launch services to customers, enabling the deployment of satellites and space research.

One company that has rocketed higher this year is AST SpaceMobile (NASDAQ: ASTS), a satellite designer and manufacturer looking to build up a space-based cellular broadband network. The company has made several major deals this year, and the stock has surged 835% over the past year.

According to a report published by Research Nester, the 5G-from-space market could grow to $66 billion by 2037, or around 44% compounded annually. Given the industry's vast potential, could AST SpaceMobile stock be a millionaire maker?

Let's dive into the business and find out.

The space-based communication industry is set for explosive growth

Space-based connectivity aims to provide reliable, widely available broadband services worldwide. This can benefit areas without traditional infrastructure or where installing that infrastructure is prohibitively expensive.

Space-based communication and data transmission also help facilitate other emerging technologies, like autonomous vehicles or Internet of Things (IoT) devices, which use networks to communicate with other devices. These technologies could also provide communication networks that could eventually power the robots and landers that explore the Moon, Mars, and beyond.

AST SpaceMobile has had a momentous year

AST SpaceMobile focuses on launching commercial satellites into low-Earth orbit to provide cellular broadband service accessible by standard mobile phones. Earlier this year, AST SpaceMobile made a big splash when it partnered with major communication providers AT&T and Verizon Communications to expand its space-based network.

In May, the company entered an agreement with AT&T to utilize its space-based network to provide broadband coverage for everyday cellphones. The two companies have been in a partnership since 2018, but the new agreement upgrades the partnership and extends it through 2030.

Around the same time, Verizon committed $100 million to AST SpaceMobile as part of its new agreement. The commitment includes $65 million in commercial pre-payments, $45 million of which is subject to certain conditions, and $35 million of convertible notes.

The agreements were a massive win for AST SpaceMobile, which had only one satellite in orbit earlier this year. The company made more news when it successfully launched five of its satellites, known as BlueBirds, into low earth orbit in September.

Image source: Getty Images.

When fully extended, the BlueBird satellites' communication antennas span 693 square feet, the largest ever deployed by a commercial spacecraft. According to Abel Avellan, CEO of AST SpaceMobile, the launch capped a "momentous occasion" for the company. Looking forward, AST plans to launch 17 more satellites by the first quarter of next year, and plans to build 155 by 2030.

Is AST SpaceMobile a millionaire-maker stock?

The expanded agreements and launch of AST SpaceMobile's satellites are the first steps toward the company reaching commercial scale. Analysts at Deutsche Bank project that AST SpaceMobile's revenue could grow to $50 million by next year, $1.4 billion by 2027, and $5.1 billion by 2030. It also expects the company to turn cash-flow positive by 2027.

Valuing companies can be difficult, especially when they are in an emerging industry with lots of hype. That said, Lockheed Martin values space companies at around 4x sales, based on its acquisition of satellite manufacturer Terran Orbital earlier this year.

At a price-to-sales ratio of 4x, the company would have a market capitalization of around $20.4 billion, or 358% above its current market capitalization of $4.5 billion. To make $1 million by 2030, you would have to invest around $218,340 in the company today.

Should you buy the stock today?

AST SpaceMobile isn't cheap, but if things go right, it could grow into its lofty expectations. Owning the stock presents high upside potential, but it will also likely experience significant volatility as its growth story unfolds.

However, it will not likely be a millionaire-maker stock over the next decade unless you are extremely aggressive and everything goes according to plan. With that said, you don't want to rely on a single stock to make you rich. Instead, you want to own a diversified basket of stocks and focus on a long-term buy-and-hold approach, looking decades ahead.

AST SpaceMobile could be one piece of your portfolio. But it should be a small piece if you are buying it today, given the speculative nature of the business and the fact that cash flow-positive operations are still a few years away.

Should you invest $1,000 in AST SpaceMobile right now?

Before you buy stock in AST SpaceMobile, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AST SpaceMobile wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $879,935!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of October 21, 2024

Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin, Rocket Lab USA, and Verizon Communications. The Motley Fool has a disclosure policy.