AST SpaceMobile (NASDAQ: ASTS) stock popped on Wednesday, closing the day 3% higher in response to news that Scotiabank had initiated coverage of the stock with a sector outperform (i.e., buy) rating. On Friday, for the second time in three days, the tiny cellphones-to-satellites communications company is again enjoying a much-appreciated lift -- this time, thanks to Switzerland's UBS.
As of 10:30 a.m. ET, AST stock is up a solid 6%.
UBS says it's time to buy AST SpaceMobile stock
In Wednesday's note, Scotiabank made the argument that AST's leading role in "the biggest revolution in network architecture in decades" (i.e., technology to let ordinary, off-the-shelf cellphones communicate with other cellphones via satellite) made the stock worth $7.50 per share. UBS isn't quite that optimistic -- but it's close.
Although AST stock is currently pre-revenue, UBS agrees that AST is a leader in cellphones-to-satellites technology. And while buying a company with no revenue (let alone profits) may not be for everyone, the banker believes the potential rewards from a ground-floor investment in AST could outweigh the risks.
In UBS' opinion, AST SpaceMobile stock could more than double, and hit $7 a share within a year.
Is AST SpaceMobile stock a buy?
It almost goes without saying that UBS thinks that's a sufficiently high potential profit to justify a buy rating on AST. It's also worth pointing out that the idea of turning ordinary cellphones into satellite phones no longer seems as far-fetched as it did when AST first floated the idea. In the years since, Apple and Globalstar have begun adopting the concept themselves, with the former using the latter to provide emergency satellite phone access to iPhone 14s and iPhone 15s in areas with no "bars."
All that being said, it would be wrong to not highlight the risks in this investment. AST has no revenue to support its expansion at present and annual capital spending requirements exceed $125 million currently (and are expected to rise sharply) -- but only $133 million in the bank. AST is almost certainly going to need to create and sell a lot more shares, and probably take on more debt as well, as it builds out its satellite constellation.
Right now, it's a race to see whether AST can reach self-sustaining revenue before it runs out of cash or dilutes its existing shareholders into irrelevance first. While Scotiabank and UBS may be right about the potential rewards from this stock, they're certainly right that this investment is high-risk.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.
