Why AST SpaceMobile Stock Tumbled by Nearly 10% Today

Key Points

• A rival's splashy deal announced Monday still wasn't sitting well with investors.

• This was compounded by an analyst's recommendation downgrade.

• 10 stocks we like better than AST SpaceMobile ›

A recommendation downgrade by an analyst made for a gloomy Tuesday for AST SpaceMobile (NASDAQ: ASTS). Investing in the space telephony specialist felt like dialing a wrong number, as its share price swooned by almost 10% on the day. The bellwether S&P 500 (SNPINDEX: ^GSPC) did far better, landing in the black with a 0.3% increase.

Deals in space

That change was made a day after AST was socked by news that Elon Musk-owned rival SpaceX is purchasing two blocks of 5G telephony spectrum from satellite company EchoStar for its Starlink phone service.

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Image source: Getty Images.

The person behind the downgrade is UBS pundit Chris Schoell, who reduced his AST recommendation to neutral from buy. He also sliced his price target to $43 per share from $62.

Not surprisingly, much of Schoell's new take on AST is based on the Starling/EchoStar deal. According to reports, the analyst wrote in his update that the arrangement gives a significant boost to AST's main competitor. It also comes at a time when AST is struggling to build out its satellite network.

Schoell doesn't feel as if this is a crushing defeat for AST. In his view, the company has good relationships with phone service carriers and advantageous technology, among other competitive advantages.

Estimates cut

Nevertheless, the analyst reduced his long-term estimates for AST. He now believes the company will book $3 billion in revenue in 2030, filtering down into earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.4 billion. Previously, he was modeling a respective $3.6 billion and $2.9 billion for that year.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.