Why SpaceX's Spectrum Purchase is Good for AST SpaceMobile Stock

Dow Jones
Yesterday

AST SpaceMobile stock has been battered by several things in recent months, leaving shares attractive, according to Deutsche Bank analyst Bryan Kraft.

On Monday, he upgraded shares to Buy from Hold. He left his price target unchanged at $93.

Shares of the space-based communications company were up 4.21% on Monday.

An upgrade without a price target change gives investors an idea about how things have been going. AST stock was north of $130 in May, ahead of the June SpaceX IPO, which supercharged interest in space stocks.

Investors, it's said, buy the rumor and sell the news, and many space-related stocks fell after the SpaceX IPO. Rocket Lab stock, for instance, peaked above $150 ahead of the IPO before falling below $60 in July.

AST had some other issues, including a failed Blue Origin launch, which delayed the buildout of AST's communications satellite constellation. And shares fell 10.5% on Friday after SpaceX announced plans to buy more wireless spectrum, stoking fears that SpaceX could disrupt traditional telecom players such as AT&T.

Some on Wall Street didn't think Friday's AST move made sense, pointing out that wireless carriers could use AST to compete with SpaceX's space-based broadband product, Starlink.

Kraft is one of those who disagreed with the move. "The [greater than] 10% move on Friday was misguided since the 800 MHz spectrum SpaceX will be acquiring doesn't make SpaceX more competitive with AST as an [mobile network operator] partner for [space-to-device], and AST isn't targeting direct-to-consumer, for which SpaceX will primarily use the 800 MHz."

SpaceX buying more wireless spectrum could also push T-Mobile toward AST, Kraft argues. Today, T-Mobile uses SpaceX for its space-to-cell connectivity: "SpaceX's efforts to compete with the Big 3 mobile network operators in mobile continues to antagonize the Big 3 (and shrink their market capitalizations), pushing them even closer to AST."

A lot is changing in wireless communications, with space becoming more important. AST is building a satellite constellation in space which appears to be getting more valuable, not less, as the situation develops.

With the upgrade, 44% of analysts covering AST stock rate shares Buy, according to FactSet. The average Buy-rating ratio for S&P 500 stocks typically ranges from 55% to 60%. The average analyst price target for AST stock is about $83.

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