AST SpaceMobile: Reaching for the Stars or Overheating in Orbit?

Key Points

• ASTS has surged nearly 450% YTD, showing impressive relative strength with a 300% gain last quarter compared to the broader technology sector's decline.
• Recent momentum stems from a commercial agreement with AT&T to launch the first-ever space-based broadband network.
• Short interest is high at 22.11%, adding volatility to the stock, but analysts remain bullish, projecting over 30% upside.

AST SpaceMobile NASDAQ: ASTS has been on an incredible tear in 2024, surging nearly 450% YTD. It has also sidestepped recent market weakness and displayed remarkable relative strength, particularly in the last quarter, where it gained close to 300% versus the technology sector's negative return in the same period. 

The company's rapid rise has raised questions about whether there's still value for growth-orientated investors or if the stock is overvalued in the short term and is due for a pullback.

What Is AST SpaceMobile?

AST SpaceMobile is building the world's first space-based broadband cellular network aimed at providing global coverage to unmodified mobile devices. Its groundbreaking technology allows users to access mobile broadband services from anywhere, bypassing the need for terrestrial cell towers. 

The company's SpaceMobile service is particularly attractive for end-users in remote locations with little to no cellular coverage. Founded in 2017 and headquartered in Midland, Texas, AST SpaceMobile is nearing mid-cap status with an $8.5 billion market cap and is now a member of the Russell 2000 index.

What's Behind AST SpaceMobile's Recent Surge?

ASTS has been on fire, surging over 700% in the past year, with much of the momentum coming in the last quarter. The stock started its ascent in late May after the company announced a significant commercial agreement with AT&T NYSE: T. The partnership aims to deliver the first-ever space-based broadband network that connects directly to everyday mobile devices without the need for special equipment. This deal marked a significant milestone, driving investor excitement and sparking a price and trading volume breakout.

The momentum continued to build with the announcement that AST SpaceMobile plans to launch its first satellites in September, enhancing its collaboration with AT&T and Verizon NYSE: VZ to expand coverage in the U.S., particularly in areas underserved by traditional cell towers. Pitched as a competitor to SpaceX's Starlink, AST SpaceMobile seeks to revolutionize global internet connectivity, targeting regions where billions still lack access to reliable internet.

Most recently, the stock jumped another 12% on Wednesday following an interim business update from the company. AST SpaceMobile announced that it expects to have $440 million in cash, thanks partly to $155 million from the redemption of warrants. The company confirmed that the satellite launch from Cape Canaveral is scheduled for mid-September and provided more detailed updates on both its financials and its orbital launch plans.

Analysts Remain Bullish on ASTS Despite Rising Short-Interest

In addition to these positive developments, short interest in ASTS has surged. As of mid-August, 22.11% of the stock's float, or roughly 28.5 million shares, was sold short, a 9% increase from the previous month.

With an average daily volume of just under 10 million shares, the high short interest adds an extra layer of volatility, creating the potential for a short squeeze and significant upward momentum.

While the growing short interest signals some skepticism, analysts remain bullish. The stock has a consensus Buy rating, and its current price target of $43.74 implies more than 30% potential upside, suggesting that despite its meteoric rise, AST SpaceMobile may still have room to run.

The Bottom Line: AST SpaceMobile’s Potential and Risks for Investors

With partnerships, upcoming satellite launches, and strong financial backing, AST SpaceMobile has positioned itself as a significant player in the race to provide global broadband connectivity. However, its rapid rise in recent months and significant short interest suggest that investors should proceed with caution. In that regard, the stock might be best suited for those with a significantly increased appetite for risk, along with short-term focused momentum traders who are able to take advantage of rapid price swings.