Why is AST SpaceMobile stock up 20% on Wednesday?

AST SpaceMobile Inc (NASDAQ: ASTS) is up some 20% on Wednesday after announcing to have teamed up with Verizon Communications Inc (NYSE: VZ).

Why is $VZ deal a positive for AST SpaceMobile stock?

The partnership with $VZ is much like the one it secured recently with AT&T Inc and is aimed to enabling remote coverage across the United States.

$ASTS sees these deals as means of “essentially eliminating dead zones and empowering remote areas of the country with space-based connectivity”, as per Abel Avellan – its chief executive.

The Nasdaq listed firm is strengthening its footprint in the “direct-to-device (D2D)” communications market as it continues to build satellites that will bring broadband to unmodified smartphones.

AST SpaceMobile stock has now more than tripled since its year-to-date low in early April.

Further details of the AST-Verizon agreement

The deal that AST SpaceMobile announced with Verizon today includes a $100 million raise. $65 million of that will be in the form of commercial service prepayments while the rest will be in convertible notes.  

Prepayments worth $45 million are “subject to certain conditions” including signing of a definitive agreement as well as the need for regulatory approvals, the press release added on Wednesday.

Note that $ASTS rival Starlink has also partnered with T-Mobile to explore the D2D opportunity. Apple Inc is aggressively investing in its “emergency SOS with Satellite” service as well.

Wall Street currently has a consensus “buy” rating on AST SpaceMobile stock that does not pay a dividend at writing.

$ASTS reported Q1 earnings earlier in May

AST SpaceMobile will likely roll out its first five commercial satellites before the end of 2024. CEO Avellan also said on Wednesday:

Partnership with Verizon will enable AST to target 100% coverage of continental U.S. on premium 850 MHz spectrum with two major mobile operators in the most valuable wireless market in the world.

It is worth mentioning here that rival Starlink has over 3 million customers currently and is expected to launch its T-Mobile enabled phone service at some point this year.

AST SpaceMobile stock has been in an uptrend ever since it posted its Q1 earnings report even though net loss increased from $16.32 million to $19.73 million on a year-over-year basis.

$ASTS reported $0.5 million in sales for its recently concluded quarter on May 15^th. At the time CEO Avellan said “we are set up for an exciting summer ahead as we push forward on all fronts of our business”.