Will Higher Operating Expenses Derail ASTS' Growth Trajectory?

AST SpaceMobile, Inc. ASTS has been adversely impacted by unfavorable macroeconomic conditions, including rising inflation, higher interest rates, capital market volatility, tariff imposition and geopolitical conflicts. These have led to continued fluctuations in satellite material prices, resulting in increased capital costs and pressure on the company’s financial performance. In addition, AST SpaceMobile has to continuously customize its network offerings, enhance the cost-effectiveness of its products and services and boost its satellite data networks with evolving demand, which results in higher operating costs.  

The company faces severe competition from existing and new industry leaders like SpaceX’s Starlink and Globalstar. Hence, to combat such competitive pressure, ASTS has to continuously upgrade its service offerings, leading to high costs and difficulties for developing, building and launching a satellite network.  

Due to high infrastructure setup costs and research and development (R&D) expenses for highly sophisticated satellite technology, AST SpaceMobile expects significant expenditures in the upcoming months for building and launching the next crop of satellites in tune with its expansion plans to serve the full spectrum of U.S. subscribers. This is largely because the company is slated to deploy about 45-60 satellites in orbit by the end of 2026.

How are Competitors Faring?

Competitors like Viasat, Inc. VSAT and Iridium Communications Inc. IRDM are also facing the heat from high operating expenses. Iridium operates one of the largest commercial constellations with a mesh architecture of 66 operational Low-Earth Orbit satellites. The company has been making solid investments to boost its technology infrastructure. It aims to launch satellite services for Direct-to-Device and satellite-based personal communication devices. This has swelled its operating expenditures owing to high R&D costs. 

Viasat is ramping up investments in the development of its revolutionary ViaSat-3 broadband communications platform, which will have nearly 10 times the bandwidth capacity of ViaSat-2. The ViaSat-3 platform will help form a global broadband network with sufficient network capacity to allow better consumer choices with an affordable, high-quality, high-speed Internet and video streaming service. This has led to high operating costs and difficulties for developing, building and maintaining a dedicated satellite network.

ASTS’ Price Performance, Valuation and Estimates

AST SpaceMobile has gained 124.7% over the past year compared with the industry’s growth of 33.7%

From a valuation standpoint, AST SpaceMobile trades at a forward price-to-sales ratio of 95.7, well above the industry.

The Zacks Consensus Estimate for AST SpaceMobile’s earnings for 2025 has moved northward over the past 60 days.

AST SpaceMobile currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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