AST SpaceMobile's Verizon deal 'another vote of confidence,' UBS says

By James Rogers

Shares of AST SpaceMobile skyrocketed Wednesday following the Verizon deal

Space-based broadband company AST SpaceMobile Inc.'s deal with Verizon Inc. is further evidence of its strength in the emerging satellite cellular broadband market, according to UBS.

Shares of AST (ASTS) ended Wednesday's session up 69.2%, lifted by the announcement of the Verizon Communications Inc. (VZ) deal. Early Wednesday, the companies announced plans to target 100% geographical coverage of the continental U.S. from space on premium 850 MHz cellular spectrum. The satellite broadband company's shares are down 5% Thursday.

AST's stock surged earlier this month following the announcement of an agreement with AT&T Inc. (T) to provide the company's space-based broadband network direct to "every day" cell phones. There were already links between the two companies - earlier this year, AST secured a strategic investment from AT&T, Alphabet Inc.'s Google (GOOG) (GOOGL) and Vodafone Group (VOD), which was an existing investor.

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The Verizon deal is "another vote of confidence" from the largest U.S. wireless carrier, UBS analyst Christopher Schoell wrote in a note released Wednesday. The company is well positioned to tap into the emerging satellite cellular broadband market, according to Schoell. "This follows AST's announcement of a definitive commercial agreement with AT&T two weeks ago and gives ASTS nationwide access to 850 MHz spectrum in the U.S.," he added. "We see this as a positive surprise after prior reports tied Verizon to Amazon's Project Kuiper."

Project Kuiper is Amazon.com Inc.'s (AMZN) low-Earth-orbit satellite-broadband initiative. The project's goal is to increase global broadband access through a constellation of 3,236 satellites.

UBS has a buy rating for AST. All of the four analysts surveyed by FactSet have a buy rating for the stock.

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"AST is a high-risk, high-reward type investment, but we believe it will be a leader in the emerging space-to-cellular broadband market - an industry with the potential to generate $10s of billions in annual revenue by providing uninterrupted coverage to traditional mobile devices," wrote UBS's Schoell. "Satellites have long been used for connectivity but the ability to offer broadband directly to existing phones will be the next leg of growth."

"Multiple players are targeting the opportunity but we believe AST is well-positioned given its time to market advantage and ability to link unmodified devices (5.5B globally) using multiple spectrum bands," Schoell added. "While the business plan has clear risks (regulatory, launch timing/failures, funding, competition), its broad list of partners (AT&T, Vodafone, Rakuten, Google, AMT and now Verizon) lends credibility to its technology and funding path."

AST shares have risen 41.3% in 2024, outpacing the S&P 500 index's SPX gain of 10%.

-James Rogers

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05-30-24 1043ET

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