Deutsche Bank upgraded AST SpaceMobile (NASDAQ: ASTS) from “Hold” to “Buy” while maintaining its $93 ASTS stock price target. The target implies approximately 82.5% upside from the last closing price of $50.97.
The bank had previously downgraded the stock in May following a New Glenn launchpad explosion that delayed AST SpaceMobile’s launch plans, alongside concerns about its valuation.
Now, however, analyst Bryan Kraft argues that the fact that ASTS shares have fallen roughly 65% from their May all-time high has created an attractive entry point amid improving prospects and several catalysts that investors may be overlooking.
“We are upgrading ASTS to Buy and maintaining our $93 PT. The stock is down ~65% from its all-time high in May. We had downgraded the stock in May after the New Glenn launchpad explosion that introduced a material delay in ASTS’ launch plans, combined with valuation concerns. However, we believe now is an opportune time to become more constructive…” Kraft wrote.
ASTS stock price year-to-date (YTD). Source: Google Finance
Deutsche Bank upgrades its AST SpaceMobile stock rating
Kraft’s renewed bullish outlook centers on the value of AST SpaceMobile’s spectrum holdings. Namely, the analyst estimates that spectrum accounts for all but approximately $10 per share of the company’s enterprise value. What this suggests is the market assigns relatively little additional value to its satellite-based direct-to-device (D2D) business.
Moreover, a potential shift in T-Mobile’s satellite connectivity strategy could replace Starlink with AST SpaceMobile as its D2D partner through a joint venture. Indeed, Kraft noted that T-Mobile appears to have removed some references to Starlink from its website after the announcement that AT&T, Verizon, and T-Mobile had reached a definitive agreement to establish a D2D joint venture.
“We believe it is increasingly likely that T-Mobile will switch from Starlink to ASTS as its D2D partner (through the JV). Roughly coincident with the timing of the announcement that AT&T, Verizon, and T-Mobile reached a definitive agreement to form a D2D JV on Oct. 1; T-Mobile appears to have removed many (but not all) references to Starlink from its website,” he added.
Moreover, the bank also argues that SpaceX (NASDAQ: SPCX ) growing ambitions in the mobile market could push the three carriers closer to AST SpaceMobile as they seek to defend their existing businesses.
The Buy upgrade therefore rests on three factors: a lower share price, the potential for T-Mobile to switch its D2D partnership to AST SpaceMobile, and the possibility that intensifying competition from SpaceX could accelerate demand for the company’s services.
Featured image via Shutterstock
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