AST SpaceMobile (NASDAQ:ASTS) is in the communication services sector and has seen its shares explode in 2024. The company’s stock is up over 500% this year despite producing little to no revenue and tens of millions of dollars in losses.

So, why is the market so bullish on this stock, and what exactly does the firm do? Let's explore these questions together. We'll review the company's annual filing and recent earnings, analyze the size of its potential market and where it could add value, and gain insights into the company's future prospects.

AST Wants to Connect the Entire World to Mobile Internet

AST SpaceMobile describes itself as “building the first and only global Cellular Broadband network in space designed to be accessible directly by everyday smartphones." Simply put, the firm wants to launch satellites in Earth’s orbit that cell phones can connect to for their wireless coverage. Currently, cell phones connect to their coverage networks through towers that broadcast signals.

The company’s plan is to broadcast signals across essentially the entire Earth, allowing for people in remote parts of the world to connect. The signal would provide calling, texting, and mobile internet connectivity. Its service is similar to the SpaceX product, Starlink. But Starlink provides fixed-location high-speed internet, not mobile coverage.

Analyzing AST’s Massive Potential Market and Value-Add

Currently, about 3.4 billion people are unconnected to mobile internet. However, 89% of those people have mobile internet access but do not use it for various reasons. Mainly, two-thirds of those people do not own a mobile phone because the devices themselves are unaffordable. Only around 400 million people worldwide do not have mobile internet coverage. Knowing this, providing people with mobile internet service who can’t get it now isn’t the company’s primary market.

Of the people who have mobile internet service, 90% of them have access to 4G speeds. This is relevant because this is the level of speed that AST’s coverage would offer based on current results. Providing faster speeds isn’t a huge selling point either, although the company does want to provide 5G speeds eventually.

The firm’s main value-add is through providing coverage when people travel to remote locations rather than where they live. According to the firm, 90% of the earth’s surface does not have mobile device coverage of any kind, including calling, texting, or internet.

The company says 5.6 billion mobile coverage subscribers are “constantly moving in and out of coverage." If people travel to a place with no or bad coverage, they would be prompted on their phone to connect to the company’s network through their existing mobile network operator (MNO) like AT&T (NYSE:T). They would purchase a plan through AT&T, and then AST would be paid through a revenue-sharing agreement.

The company says it has partnerships with 45 MNOs, including some of the largest in the world, like AT&T, Verizon (NYSE:VZ) and Vodafone (NASDAQ:VOD). Together, these MNOs have 2.5 billion subscribers. If the company could generate just $5 in revenue once a year from each user, that would generate $12.5 billion in revenue.

AST’s Earnings: Uninteresting Numbers Along with a Crucial Announcement

When it comes to the company’s Q2 earnings report, there is not much to see. Still in the developmental phase of the business, the firm had less than $1 million in revenue. This is completely expected and is not a source of concern.

However, the company’s shares spiked 50% on the day of the release, as the firm said it plans to launch its first five satellites in September.

When Will We Know If the Buzz is Justified?

AST SpaceMobile is a firm with incredible potential. They have shown in limited testing that their technology works, and investments from large telecom companies are a vote of confidence.

In the company’s earnings call, CEO Abel Avellan said that after the September launch, commercial service could begin in “a few months." Based on this the company’s Q4 2024 earnings report could be massively important as it may be able to generate some significant revenue by then. However, analysts’ estimate right now don’t predict significant revenue until Q1 2025.

It will be important to pay attention to both. Sales numbers will help show how favorable the terms of its revenue-sharing agreements are. It will be important to look at data the company may provide around its number of users to gauge demand. Seeing how successful the firm is on the top line will give a glimpse of whether the hype around AST SpaceMobile is real.

Source MarketBeat