Earnings Reports (May 13th-17th)
Earnings Reports (May 13th-17th)
Taking a Look at AST SpaceMobile (ASTS) & Boston Omaha's (BOC) Quarterly Results.
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1. AST SpaceMobile (ASTS)
AST SpaceMobile (ASTS), the first ever space-based cellular broadband company announced their earnings results last week along with a partnership with AT&T. This news, along with AST's latest earnings report, has sent the stock soaring nearly 100% in one week.
Solidifying a Strategic Partnership
Since 2018, AT&T and ASTS have collaborated, but this new commercial agreement marks a significant milestone. It strengthens their existing partnership and advances ASTS’s progress toward revenue generation. This summer, the company plans to launch its initial five satellites, enabling commercial service.
In this new agreement, Chris Sambar, AT&T's head of network, will join ASTS's board. Both companies will collaborate on rolling out the technology, including developing, testing, and troubleshooting to make satellite coverage across the continental U.S. possible.
"Working together with AT&T has paved the way to unlock the potential of space-based cellular broadband directly to everyday smartphones," said AST founder and CEO Abel Avellan. "We aim to bring seamless, reliable service to consumers and businesses across the continental U.S., transforming the way people connect and access information."
Financial Performance and Outlook
The company also reported a reduction in losses, with the company losing $0.16 per share in the first quarter, down from $0.23 per share a year ago, on revenue of about $500,000.
There's plenty of excitement around ASTS right now. With AT&T as a strong partner, the commercialization of AST's technology seems within reach (although questionable with the execution on the timeline). What once seemed like a far-fetched idea is now on the brink of becoming a reality. The upcoming launch is just the beginning of a long rollout, and significant troubleshooting and modifications will likely be necessary as the technology transitions from controlled testing to real-world conditions. So, investors should not get overly optimistic.
Investor Sentiment & Wall Street
Historically, ASTS has been a volatile stock. Investors interested in this opportunity should be patient and consider waiting for a better entry point following this recent surge. Deutsche Bank analyst Bryan Kraft raised his price target on ASTS to $22 from $19, maintaining a buy rating. He noted the "asymmetric risk-reward" profile, with the stock closing Thursday at $4.03 per share but potentially jumping to $22. This has added to the squeeze we are seeing in the recent surge in stock price.
Kraft's price target is ambitious, but it's worth noting that two years ago, ASTS shares traded above $12 when the stock was significantly more speculative, and the company was further from a commercial launch. Nevertheless, patience is essential right now. Space stocks are notoriously risky, and despite the progress they have made, the company still has a long way to go before it can declare success. I won’t be adding to my position until their commercial launches become much clearer, since this management team is known for delays.
2. Boston Omaha (BOC)
Boston Omaha (BOC) recently announced its Q1 2024 earnings this past week. Total revenues were actually up, and every segment has shown much stronger sales numbers compared to last year. Despite this positive performance, the stock is now reaching a 52-week low, trading below $14 per share. I believe this quarter is not being properly priced in and that the market is undervaluing the stock by a wide margin. Much of the downturn fueled recently from the Co-CEO step down.
The management changes indicate a more focused leadership determined to drive shareholder value. I think investors should view this positively, as this will allow one person to make decisions and reduce gridlock in the company's top management. This streamlined approach seems very favorable, and I expect good things from Adam Peterson going forward, as mentioned in my last article.
In Q1 2024, it shows that management is still very committed to the company, with capital allocation being their primary focus over the past few years. Management makes a significant difference through their investment decisions, and I believe most of their investments will pay off. For example, since the Sky Harbour investment in August 2021, Sky Harbour's stock has rallied from $4 to $12 per share as of 2023. And this will likely continue since the SKYH is executing.
Looking ahead, I expect the positive momentum of fundamentals to eventually drive BOC’s stock price up as people recognize the company is performing well, despite what appears to be businesses in secular decline. While billboards may seem outdated (Boring), revenues continue to hold up well, showing resilience. I think management can pivot resources away from declining industries and into growing ones, leading to a significant change as capital gets redeployed into better areas.
Going forward, I plan to hold onto my shares. While my conviction was initially shaken by the CEO news, after carefully considering the overall situation, I believe it's reasonable to retain my investment in this small conglomerate. Additionally, there are still unanswered questions that I expect will be addressed in the upcoming shareholder letter, which I am patiently awaiting.