On Thursday, Scotiabank updated its financial outlook for AST Spacemobile (NASDAQ:ASTS) shares, raising the price target on the to $12.90 from the previous $7.40. The firm maintained a Sector Outperform rating on the company's shares.
The revision followed the announcement of AST Spacemobile's new deal with Verizon (NYSE:VZ), which the analyst believes indicates that initial estimates were too conservative.
The recent deal with Verizon, which is valued at $65 million, has set a new precedent for the company's per-subscriber prepayment rate at $0.70, surpassing the $0.28 per subscriber prepayment rate from a prior agreement with AT&T (NYSE:T) worth $20 million. This development has led to an upward revision in AST Spacemobile's price target.
AST Spacemobile is expected to launch its Block 1 satellites by next summer, which will provide coverage to 99% of the Earth's population for less than an hour each day.
This coverage is anticipated to enable global mobile network operators (MNOs) to test the "string of pearls" satellite formation. The analyst projects that this will accelerate the pace of prepaid monetization for the company.
The analyst's commentary highlighted the potential for frequent revisions to estimates due to the novelty of AST Spacemobile's business model.
However, with the Block 1 satellites' deployment on the horizon, there is an expectation of increased opportunity for the company to engage with global MNOs and to capitalize on its innovative technology.
In summary, Scotiabank's adjusted price target of $12.90 per share reflects a more optimistic valuation of AST Spacemobile's prospects following the recent agreement with Verizon and the anticipated impact of the upcoming satellite launches. The maintained Sector Outperform rating suggests continued confidence in the company's performance.
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