Al Root

Valuing unprofitable growth stocks in brand-new industries is never easy. Just look at AST SpaceMobile.

Shares of the space-based communications startup traded as low as $83.91 and closed at $85.73, down 12% on Wednesday, after a downgrade from Scotiabank analyst Andres Coello.

The S&P 500 and Dow Jones Industrial Average fell 0.3% and 0.9%, respectively. Coming into Wednesday trading, AST stock was up 304% over the past 12 months, boosted by a growing belief that the commercial space economy can be profitable and large. Shares of space launch services provider Rocket Lab were up about 200% over the same span.

Coello cut his rating to Sell from Hold, according to FactSet. Barron's hasn't seen a copy of the full report. His price target for shares is $45.60, down more than 50% from recent levels.

Coello calls the company's technology impressive. It is. AST is building a satellite constellation capable of bringing data services to any smartphone.

Still, valuation is a stumbling block. The average analyst price target is $77, according to FactSet, above Coello's but below the stock's current price. At $77, AST would be valued at roughly $28 billion, or more than 100 times estimated 2026 sales of $270 million.

That valuation requires enormous growth, which is expected. Wall Street sees sales jumping 10-fold between 2026 and 2029.

Even if that happens, and Wall Street gets profit margins correct, AST is currently trading at 20 times estimated 2029 earnings before interest, taxes, depreciation, and amortization, or Ebitda. Industrial stocks in the S&P trade for about 19 times trailing 12-month Ebitda.

To be sure, stocks in the S&P don't grow like new, hot startups, making comparisons difficult, another reason it's hard to value small growth stocks.

AST isn't expected to generate positive operating profit until 2027.

Overall, 45% of analysts covering the stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

A downgrade to Sell doesn't affect the Buy-rating ratio but it does change the Sell-rating ratio. About 27% of analysts now rate AST stock as Sell. The average Sell-rating ratio for S&P 500 stocks is closer to 7%.

Valuation is the simplest way to understand analyst sentiment. And right now, it looks stretched.

Write to Al Root at allen.root@dowjones.com

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January 07, 2026 16:44 ET (21:44 GMT)

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