ASTS Shares Drop 3% After Analyst Downgrades Rating Amid Equatys Satellite Constellation Concerns

Key Takeaways

Table of Contents

B.Riley shifted its rating on AST SpaceMobile (ASTS) from Buy to Neutral on Monday.
The investment firm slashed its price target from $85 down to $65, representing a 24% decrease.
Shares of ASTS declined 3% during early market hours, trading at $57.04.
Concerns center on intensifying rivalry from the Viasat and Space42 Equatys partnership.
Despite the downgrade, consensus among Wall Street analysts remains Moderate Buy with potential 56% gains.

Shares of AST SpaceMobile (ASTS) experienced a 3% decline on Monday following B.Riley’s decision to downgrade the stock from a Buy recommendation to Neutral. Trading activity saw the stock reach $57.04 after the announcement.

AST SpaceMobile, Inc., ASTS

Mike Crawford, the analyst behind the call, simultaneously reduced his price objective to $65 from the previous $85 mark. This represents approximately a 24% pullback in expectations.

Despite the reduction, Crawford’s new target still suggests roughly 14% potential appreciation from where shares closed on Friday. According to Crawford, the stock’s risk-reward dynamics have now “swung back toward balance” following its impressive rally in recent months.

Crawford’s revised stance doesn’t stem from doubts about AST SpaceMobile’s technological capabilities. He maintains confidence in the company’s capacity to deliver a functioning broadband direct-to-device satellite network.

Rather, the concern revolves around pricing dynamics. As new market entrants emerge, AST SpaceMobile may face constraints on what it can charge end users.

Emerging Competitive Landscape

The primary competitive concern highlighted by Crawford involves Equatys, the collaborative effort between Viasat and Space42. This venture has ambitions to deploy a constellation comprising as many as 2,800 satellites, with potential launches beginning around 2028.

Equatys continues to pursue additional strategic alliances. Crawford specifically mentioned Rocket Lab as a company that could potentially join the partnership.

Rocket Lab currently controls 8.725 MHz of valuable L-band spectrum that it acquired from Iridium. Should Rocket Lab align with Equatys, Crawford believes the competitive pressure facing AST SpaceMobile would intensify considerably.

The prospect of thousands of satellites targeting similar customer segments represents a significant market dynamic shift. While still hypothetical, analysts often incorporate such scenarios into their models ahead of time.

Crawford emphasized that he needs to see concrete operational metrics before returning to a more bullish position. Specifically, he’s waiting for transparency around mobile network operator subscriber adoption rates and actual service plan pricing structures.

Such data remains unavailable at present. Until management provides these critical figures, Crawford prefers maintaining a neutral posture.

Operational Progress at ASTS

This downgrade follows a series of operational achievements for the space-based connectivity provider. AST SpaceMobile recently transported BlueBirds 14, 15, and 16 from its Midland, Texas manufacturing site to the launch facility at Cape Canaveral.

The company also announced complete deployment of BlueBird 11. This milestone occurred approximately 35 days following the successful August 5 launch of BlueBirds 12 and 13.

From an engineering and manufacturing standpoint, the business continues to execute well. The uncertainty centers entirely on revenue potential and pricing strategy.

AST SpaceMobile has yet to achieve profitability. Trailing twelve-month revenue reached $115.3 million, which appears modest relative to the company’s $22.2 billion market capitalization.

B.Riley’s cautious stance isn’t universally shared. Berenberg recently launched coverage with a Buy recommendation and a $92 price objective, highlighting AST SpaceMobile’s first-mover advantage in space-based cellular broadband.

Meanwhile, Cantor Fitzgerald elevated its target to $90 while maintaining an Overweight stance. This divergence illustrates the ongoing debate about whether Equatys and similar ventures pose a genuine threat.

According to TipRanks data, ASTS holds a Moderate Buy consensus rating derived from 6 Buy recommendations and 5 Hold ratings. The average analyst price target stands at $88.98, suggesting approximately 56% upside potential from current trading levels.

Individual analyst targets span a considerable range, from a conservative $50.80 to an optimistic $115. This wide dispersion reflects ongoing disagreement about how pricing dynamics will ultimately play out.

In related developments, AST SpaceMobile has reportedly expressed interest in purchasing spectrum licenses from Grain Management LLC in a transaction valued around $6 billion. These licenses could prove valuable for expanding direct-to-space wireless capabilities.

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