Key Points
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AST’s carrier-first model could help it scale up its business without competing directly with telecom giants.
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The bull case for the stock hinges on the company winning massive subscriber adoption and achieving high margins.
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The stock’s valuation could swing widely.
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AST SpaceMobile (NASDAQ: ASTS) has an audacious goal: To provide cellular coverage to every location on the planet using a constellation of low-Earth-orbit satellites. It’s no surprise the stock has attracted plenty of attention, even if its share price has been volatile over the last year.
Still, the story behind AST is compelling. Its business-to-business approach — working with telecom operators instead of trying to replace them — could give it an edge over would-be competitors. But how much could AST SpaceMobile stock be worth in 2028?
AST SpaceMobile: The business breakdown
AST is building and deploying a satellite constellation designed to deliver cellular and broadband coverage through the networks of established telecom operators such as Verizon, AT&T, and Vodafone.
The selling point is simple: AST’s network can fill coverage gaps that traditional telecom infrastructure can’t reach in a cost-effective way. For carriers, that can reduce the need to spend on new towers or launch their own satellites.
For its part, the business model means AST avoids going head-to-head with entrenched telecom providers. Instead, it partners with them to serve the same customers. In theory, that’s a win-win. Carriers can reallocate capital to other priorities, while AST could generate recurring revenue.
$290 per share by 2028: Is it even possible?
Let’s walk through a bullish scenario.
AST is still unprofitable, and building a constellation of satellites capable of covering mobile dead zones worldwide is extremely expensive.
The trade-off is operating leverage. Launching satellites requires a huge up-front investment, but AST expects relatively low variable costs as more users join the service. Management believes the company’s economics could look very different once its network is fully operational. The company also got a step closer to its goal this year when it earned Federal Communications Commission (FCC) approval for U.S. operations.
That leverage is why management has said the AST’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margins could eventually reach 90% or higher.
Next, AST SpaceMobile says its partnerships with nearly 60 mobile network operators provide it with access to more than 3 billion subscribers globally. In other words, AST doesn’t need to build a consumer brand from scratch. It can sell its service through carriers via monthly add-ons, day passes, enterprise packages, or stand-alone connectivity plans.
Now for the math.
Let’s say 5% of those 3 billion subscribers use AST’s service monthly. That would be 150 million paying users.
AST hasn’t disclosed how much revenue it expects to earn per customer, as its agreements are based on revenue-sharing with mobile network operators. As a rough reference point, T-Mobile currently offers its T-Satellite service as an add-on for around $10 per month.
In this scenario, assume AST retains $5 per subscriber per month. That would work out to about $750 million in monthly revenue, or $9 billion annually.
If we apply management’s 90% EBITDA margin target, that implies roughly $8.1 billion in EBITDA. If depreciation, interest, taxes, and other below-EBITDA expenses reduce that by about 45%, AST would earn around $4.5 billion in net income.
AST has about 388 million shares and economically equivalent LLC units across all classes. On $4.5 billion in net income, earnings per share would be roughly $11.60.
From there, valuation becomes the swing factor. The median price-to-earnings ratio for companies in the communication services sector is about 16. Using that multiple, and assuming the scenario plays out, AST’s stock price could potentially reach roughly $174 by 2028.
But if AST can monetize the service at scale, hit 90% EBITDA margins, and generate $4.5 billion in net income, would the market really price it at an average multiple? Probably not.
So let’s raise the multiple to 25 times earnings. That would put the stock at $290, based solely on the commercial side of the business. That doesn’t factor in potential future military and government applications.
Is AST SpaceMobile stock a buy?
To be clear, all of those figures assume a bullish scenario. A lot would have to go right for those numbers to show up. But if AST delivers on what it believes it can, its path toward a $300 share price by 2028 is certainly not impossible.
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Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool recommends T-Mobile US, Verizon Communications, and Vodafone Group Public. The Motley Fool has a disclosure policy.
