AST SpaceMobile Stock Is Down on SpaceX News—and It Shouldn’t Be

A rendering of AST SpaceMobile technology. AST is building a satellite constellation to compete with SpaceX’s Starlink. (Courtesy AST SpaceMobile)

Key Points

• SpaceX purchased low-band wireless spectrum, fueling disruption fears for traditional wireless companies.
• Shares of Verizon, AT&T, and T-Mobile fell between 10% and 13% in late Friday trading following the announcement.
• AST SpaceMobile shares fell nearly 15% on Friday, though analysts say the company could benefit as traditional carriers look to compete with SpaceX.

SpaceX shook up the wireless communications industry on Thursday by buying more wireless spectrum, fueling disruption fears for traditional wireless companies.

Make no mistake, SpaceX wants to be a mobile wireless provider (as management has repeatedly said), but the traditional players will fight back as space- and land-based communications technology merge.

That should be good for shares of AST SpaceMobile , which aims to compete with SpaceX’s space-based broadband product. AST stock is getting hammered on Friday, though. That’s odd.

On Thursday, SpaceX announced the purchase of low-band spectrum for undisclosed terms. Low-band spectrum is good for broad wireless coverage and reaching inside buildings. It’s another step on the path toward Starlink Mobile (or whatever Elon Musk decides to name SpaceX’s mobile offering).

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Shares of Verizon , AT&T , and T-Mobile were down between 10% and 13% in late Friday trading. Shares of wireless tower REITs American Tower and Crown Castle were up about 8% and 13%, respectively.

SpaceX’s move is an endorsement of terrestrial wireless infrastructure, says Bernstein analyst Madison Rezaei. She describes the tower companies as apartment buildings. The tower apartments have three tenants—Verizon, AT&T, and T-Mobile—and might soon have a fourth.

Similarly, AST seems to be in a good position as wireless competition ramps up. Wireless carriers might be looking to the stars to fight SpaceX on its own turf. A satellite constellation operator that can move data around the globe would be a valuable ally. Still, AST shares were down almost 15% in midday trading on Friday.

That doesn’t make sense to Berenberg analyst Michael Filatov. He sees AST as a natural choice for traditional companies looking to compete. Roth Capital also sees AST becoming the direct-to-device satellite partner for the traditional wireless industry.

Still, the stock is down. One reason could be that AST didn’t buy the spectrum. It needs spectrum—the frequencies that carry data—to build its business. Still, the existing wireless players have a lot of spectrum, multiples of what SpaceX has accumulated.

MoffettNathanson analyst Craig Moffett said he was surprised by Friday’s reaction, because everyone expected it. He also doesn’t see SpaceX disrupting the three traditional carriers anytime soon. It still needs more infrastructure.

Elon Musk’s company will still need to build more infrastructure, buy an existing player for their infrastructure, or partner with an existing player like Mint or Boost Mobile.

The spectrum buy might have been a gentle reminder to the traditional industry that partnering might be the least bad option.

Whatever happens, enablers of wireless communications are seeing their valuations increase. Investors should think about what that means for AST.

Write to Al Root at allen.root@barrons.com.

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