Global MNO Partnerships And Spectrum Assets Will Drive Powerful Long Term Satellite Connectivity Upside

Catalysts

About AST SpaceMobile

AST SpaceMobile is building a global space based cellular broadband network that connects everyday unmodified mobile phones directly to satellites.

What are the underlying business or industry changes driving this perspective?

• Rapid expansion of definitive commercial agreements with blue chip operators such as AT&T, Verizon, Vodafone and stc, supported by over 50 MNO partners covering nearly 3 billion subscribers, creates a large embedded demand base that can scale recurring service revenue and accelerate top line growth.
• More than $1 billion in contracted commercial revenue commitments and sizable prepaid arrangements, including the $175 million stc prepayment, provide early visibility into monetization while de risking deployment and supporting earlier inflection in earnings and free cash flow.
• Fully funded balance sheet with over $3.2 billion of cash and liquidity to manufacture and launch more than 100 satellites, combined with vertically integrated production at a targeted six satellites per month, positions AST SpaceMobile to outrun competitors and drive operating leverage that can expand net margins over time.
• Unique spectrum position with priority rights in S Band, access to L Band and over 1,150 megahertz of tunable low band and mid band spectrum through owned and partner assets, amplified by AI driven spectrum management, supports higher capacity and premium pricing that can lift revenue per user and improve unit economics.
• Growing demand from governments and defense customers for resilient space based communications, alongside the push by mobile operators to close coverage gaps globally, aligns the constellation rollout with large, long duration contract opportunities that can diversify revenue and stabilize earnings.

Assumptions

This narrative explores a more optimistic perspective on AST SpaceMobile compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming AST SpaceMobile's revenue will grow by 394.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1639.6% today to 93.8% in 3 years time.
• The bullish analysts expect earnings to reach $2.1 billion (and earnings per share of $5.79) by about December 2028, up from $-303.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $54.2 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.8x on those 2028 earnings, up from -68.3x today. This future PE is greater than the current PE for the US Telecom industry at 8.9x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The constellation build out depends on an aggressive launch cadence in an already constrained heavy lift market. Delays or failures in launching or deploying the planned 45 to 60 satellites by 2026 and then scaling toward 90 to 100 satellites could push back commercial service activation in key regions and slow the anticipated ramp in revenue growth and earnings expansion.
• AST SpaceMobile is rapidly scaling from an R&D focused start up to a capital intensive operator, with non GAAP adjusted operating expenses already in the mid 60 million range per quarter and capital expenditures of roughly 250 to 325 million per quarter. If operating efficiencies, automation and AI driven spectrum optimization do not materialize as expected, structurally higher cost levels could prevent net margins from rising toward the optimistic long term targets and leave earnings negative for longer than anticipated.
• The business model is heavily reliant on mobile network operator partnerships and long duration commercial agreements. If MNOs are slower to commercialize satellite to device services, renegotiate revenue commitments in response to macro pressures or regulatory changes, or prioritize their own terrestrial capex and spectrum deployments, actual traffic and service adoption could undershoot expectations and reduce contracted revenue conversion, pressuring both top line revenue and free cash flow generation.
• Long term success assumes stable and favorable access to a large pool of low band and mid band spectrum globally. Spectrum markets and regulatory regimes can shift as governments and incumbents reassess orbital congestion, interference and national security concerns. Any setbacks in obtaining or retaining L Band and S Band rights or delays in approvals such as FCC processes could constrain capacity, limit pricing power and undermine the path to improving unit economics and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for AST SpaceMobile is $95.0, which represents up to two standard deviations above the consensus price target of $71.51. This valuation is based on what can be assumed as the expectations of AST SpaceMobile's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $95.0, and the most bearish reporting a price target of just $43.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $2.2 billion, earnings will come to $2.1 billion, and it would be trading on a PE ratio of 18.8x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $73.92, the analyst price target of $95.0 is 22.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.