The communications freedom launched by cellphones has one long-standing hitch: access to cell towers. The cellphone-gripping masses are constantly wandering, often starved for signal as they seek the transmitters needed to connect with their provider's network.
Now cellphones are edging into the Space Age. A group of young companies, led by the Starlink unit of Elon Musk's SpaceX and the upstart AST SpaceMobile, are launching satellites designed to bypass radio towers and connect directly with certain cellphones.
The step forward would blur the line between the typical cellphone and much more expensive satellite phones. That makes the technology highly attractive to both consumers and service providers. But the movement is in very early stages.
Still, ASTS stock soared 344% this year through Thursday, before tumbling 10% Friday on disappointing AST SpaceMobile financial results. And among other upstart space stocks, Intuitive Machines has climbed 274%. These are the kind of gains that draw attention.
So, what is behind the technology and these space stocks? Is there longer term value at work here, or is this the latest space craze destined to follow the likes of Virgin Galactic, which on Friday traded 99.5% below its February 2021 peak?
Disrupting The Gold Standard
Sat phones have long been the gold standard for those needing connectivity in remote conditions. They are expensive to use, with rates normally running to dollars per minute. But they provide coverage in the middle of the ocean, up in the air or deep in the woods.
Midland, Texas-based AST is promising to turn any ordinary cellphone, like the one in your pocket right now, into a satellite phone. They aim to do that by connecting it directly to a network of specially designed satellites parked in low-Earth orbit. The company declined to answer questions about its technology and operations.
Investors recognize the opportunity offered by a truly global wireless network. But they also see that opportunity, at least for the time being, tied up in a group of volatile young stocks behaving not unlike the rocket ships they send into space. The reaction of AST SpaceMobile stock to its earnings Friday is a good example.
That's not unheard of, but it is particularly characteristic of companies having gone public via reverse mergers with special purpose acquisition companies. That was AST's path, as it was for Intuitive Machines, Spire Global and Rocket Lab.
AST SpaceMobile's 'Meme Stock' Image
Companies born from SPACs, as they are called, can be viable targets for growth stock investors. But in many cases they act like "meme stocks," the flash-mob investing phenomena that see stocks trading detached from their underlying value. As such, AST and the new breed of space stock should be approached with a healthy dose of caution and respect.
AST traded as low as 1.99 this year in April. It then caught fire and swept above 39. It has for now settled back into a range between 20 and 31, trading an average of more than 12 million shares per day.
Shares of Rocket Lab, a launch services provider, has ranged from 3.49 to 22.55 this year, and pulled back to about 19.00 Friday. Intuitive Machines stock hit a low of 2.09 in January, then broke out to a high of 14.90 this month. It traded Friday just above 12.
The stocks are a day trader's haven. At the same time, the companies appear to be pioneering technology and territory into which the larger cellphone industry would like to evolve.
Upstart Space Stocks: Actual Rocket Science
As it turns out, the business of developing satellites is actual rocket science. AST SpaceMobile's five BlueBird satellites, which it sent into orbit in September, cost about $115 million in total.
Those first five units put AST's constellation into orbit. The company said in its earnings report Thursday that it had secured launch contracts for the next block of about 60 satellites, which would launch into low orbit from the Cape Canaveral, Fla., Space Force Station in 2025 and 2026. AST SpaceMobile plans to utilize existing launch vehicles and the New Glenn rocket from Jeff Bezos' Blue Origin for the launches.
The company said it eventually targets a 248-satellite constellation for its global services, according to Sept. 13 comments submitted to the ISED, a Canadian government department for innovation and development.
Another upstart, Spire Global of Vienna, Va., is further along, and reports having launched 175 satellites. Spire's units focus on gathering specific sorts of data, such as weather patterns and security threats. Spire Global began trading in 2020 and currently trades near 13.
AST SpaceMobile, Peers Are In Amazon's Shadow
For comparison, Starlink currently boasts more than 6,656 active satellites. Amazon.com's Project Kuiper is just preparing for the first launches of its targeted constellation of more than 3,200 satellites. And OneWeb, based in London, currently operates a 654-satellite network.
Further proof that ASTS stock is in an early-stage came late Thursday as it continued its string of quarterly losses, which widened to $1.10 a share. Sales rose above $1.1 million. Both numbers were well below consensus views. For the coming fourth quarter, analysts project $3.2 million in revenue and a 19-cents-per-share loss.
Still, AT&T upgraded its six-year commitment to AST SpaceMobile in May. That same month, Verizon signed a $100 million deal to become a strategic partner. These were major first steps toward monetizing the concept.
"With the potential to connect to millions or billions of end users, even a small piece of revenue through a partner is huge," Chris Quilty, co-CEO and president of Quilty Space, told Investor's Business Daily. Quilty Space is a space-focused research and financial advisory firm. "If AST is successful in what they're doing, they could be the most valuable company in the industry not named SpaceX."
Space Stocks' Goal: Overcoming Power, Velocity And Delay
Central to AST SpaceMobile's pitch to investors are proprietary satellites. These need to be powerful enough to connect with unmodified cellphones on the ground — and accurate enough to keep a lock on a user while passing by at 22 times the speed of sound.
"The key to connecting to an unmodified phone is to pretend to be a base station for that phone and compensate for all of the extra delays and Doppler you get when you're working with a connection between low-Earth orbit and the surface of the Earth," Todd Humphreys, professor of aerospace engineering at the University of Texas at Austin, told Investor's Business Daily.
AST SpaceMobile works by essentially tricking a customer's cellphone into thinking it's connecting to an ordinary, terrestrial cell tower. But to maintain connectivity, experts say a satellite must overcome three central problems: power, velocity and delay.
Solving the power side is a matter of building a massive satellite antenna capable of casting tight beams onto the ground. "If you've got a large enough antenna in orbit, you can hear these phones, even if the signals are as faint as they would be," said Humphreys.
The high satellite speed needed to maintain an orbit poses another problem. AST SpaceMobile's BlueWalker 3 satellite has a velocity of 27,380 kilometers per hour. (For comparison, a Boeing 787 commercial airliner has a cruising speed of roughly 1,049 kilometers per hour.) For a cellphone which passively listens for signals from a radio tower until it's ready to connect and transmit information, this poses a tremendous problem.
"If you want to have many, many more satellites, you get better and better connectivity," David Love, Nick Trbovich professor of electrical and computer engineering at Purdue University, told Investor's Business Daily.
AST SpaceMobile's Digital Ruse To Counteract The Distance
To overcome the velocity challenge, experts say AST SpaceMobile's satellites have high-powered antennas that are directed at a user's specific location. The beam is continuously adjusted. Every few minutes or so, the connection with a given area is passed to another AST satellite as the first moves out of sight. This maintains the connection with the user's handset.
Because the cellphone is unmodified, the satellites handle most of the heavy lifting regarding connectivity. "The satellite knows (a user is) going to be connecting from the surface, and so it compensates for the speed and extra delay because of the long distance involved," said Humphreys. The Doppler effect creates the latency, or delay in sending data between the surface and a satellite. AST can effectively make the cellphone think it's connecting to a base tower that's nearby.
AST SpaceMobile also puts its tech stack on the ground, turning the satellite into a signal repeater. Humphreys says this future-proofs the satellite by shifting upgrades to the base station on earth rather than to upgrading the satellite.
To get more satellites in orbit, AST requires a launch partner. For its September launch, that company was SpaceX.
Launch Partners: SpaceX And AST SpaceMobile Satellites
Hawthorne, Calif.-based SpaceX develops spacecraft with reusable launch components aimed at bringing down the cost of space travel. The rocket maker is a significant part of billionaire Elon Musk's ring of companies that includes the automaker Tesla. SpaceX offers cargo delivery and space travel to anyone willing to pay the freight. That includes AST SpaceMobile.
But one particular unit of SpaceX operations is attracting AST SpaceMobile investors. Starlink connects customers to the internet through a network of satellites designed and launched by SpaceX. Starlink, though much larger and better established, is considered one of AST's closest competitors.
SpaceX's Starlink And Hurricane Helene
Starlink recently made strides into the direct-to-cellphone space. After Hurricane Helene wreaked destruction across North Carolina, the company received emergency approval from the Federal Communications Commission to provide coverage directly to cellphones in that state.
In early 2024, Starlink completed its first text message via T-Mobile's service using its direct-to-cell satellites. The company said in 2024 it expanded its testing to include greater coverage and launched "hundreds" of satellites for its text constellation. Heading into 2025, Starlink and SpaceX plan to work toward its voice, data and Internet of Things (IoT) constellation.
In a public statement on X, SpaceX warned that the service was not ready for a commercial rollout. It also noted the authorization was temporary.
Starlink touted a free broadband service for hurricane victims, but users still had to purchase the satellite kit. That can run up to $400 including shipping. Starlink initially offered the service for free for 30 days. After that, customers had to pay a $120 monthly fee, according to reports. The company extended the offer through the end of the year after a backlash.
SpaceX did not respond to a request for comment from Investor's Business Daily. Nevertheless, the direct-to-cellphone approval was a coup for SpaceX's Starlink, positioning it as a direct competitor to AST SpaceMobile.
SpaceX, The Demand Glut And Antitrust
With Thursday's launch agreement announcement, AST SpaceMobile effectively diversified at least modestly away from its sole dependence on SpaceX as a launch provider. But, like essentially all satellite operations, it will continued to depend to some degree on SpaceX. As Amazon, Starlink and others all compete to launch their networks, that dependence carries some risk.
"The launch risk is real. It's something that AST will have to deal with," said Quilty.
But AST is not the only customer relying on SpaceX, and there is safety in numbers. "That's the challenge they face: a limited pool of launch providers, with demand outstripping supply. This is forcing companies to fall back and place orders with SpaceX."
For its part, SpaceX will want to avoid scrutiny from antitrust regulators, Quilty says. "From a public perception, or even a Justice Department view, SpaceX doesn't want to deny a competitor access to launch."
AST SpaceMobile And The Apple Factor
Other competitors are working on different ways of connecting satellites to phones, with even handset makers coming out with their own plans. Starting with the iPhone 14 in 2022, Apple has equipped its handsets to connect to Globalstar satellites for messaging. That capability requires a phone equipped with a specific radio.
While the feature was initially reserved only for contacting emergency services via text, a recent update to satellite radio-equipped iPhones enables users to send ordinary, nonemergency texts by satellite.
For now, Quilty says the threat from even industry giants like Apple is minimal.
"Globalstar launched in 2010, and were never intended for direct-to-device. You have to stand in the open, hold it out, move until it locks on and wait there until you send 12 characters," he said. "That's OK in an emergency, but AST claims you'll have a 5G experience on your phone. I think it's overstating it, but that's a big differential with AST and Starlink."
In a recent note, B. Riley Securities cited AST SpaceMobile's planning and production of its new Block 2 BlueBird satellites. Commercial service is expected to begin soon.
"SpaceX is well-funded and will eventually figure it out, but the main point is that it's not a winner-take-all," B. Riley analyst Griffin Boss said in an interview with Investor's Business Daily. He says the potential total addressable market is large enough to support multiple competitors.
Partnerships Key To AST SpaceMobile's Future
While Thursday's launch agreement news was positive, the steep dive taken by ASTS stock on Friday showed that questions remain.
Swirling around the space stock is concern over whether AST SpaceMobile can attract enough contracts to sustain itself long-term. AST SpaceMobile began its dramatic rise after sealing the definitive commercial agreement with AT&T in May.
The agreement fortified a memorandum of understanding by the two companies in 2018. Under the agreement, AST is to provide "space-based broadband network direct to everyday cellphones" through 2030, though few details are provided.
B. Riley analyst Mike Crawford says AST SpaceMobile's model means it does not need to spend money on customer acquisition, instead focusing on a white-label service to traditional telecom providers like AT&T and Verizon. He expects mobile network operators will eventually roll out AST SpaceMobile's service to customers on an a la carte basis.
More recently, AST announced a small U.S. government contract to demonstrate its ability to deliver data for defense and government communications. The news spurred a small pop in AST SpaceMobile stock on Oct. 24.
Space Stocks: Moving Beyond Meme Status
Still, for investors looking at any of the stock's in the up-and-coming space sector, the big question lies in a technology's long-term prospects.
ASTS stock "has become, for better or worse, a meme stock," said Quilty. "We've seen it go from $2 to $30 overnight, which is evidence of a volatile investor base."
AST SpaceMobile's future depends on securing more launch and services contracts, and developing an operational fleet.
"The point is, if they don't get more satellites into orbit, this could all go to zero," Quilty said. The launch of the BlueBird satellites in September marked the beginning,
Now, Quilty said, "It's down to money. It's down to time. And then the ultimate question, is this a service that people will pay for?"
