Shark Bites: This Trade Could Be Out of This World
I'm taking advantage of a sharp drop in this little-known company to ramp up a position.
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The market is struggling on Thursday as some of the recent euphoria abates and overbought technical conditions start to matter. Breadth is poor, with around 3,350 gainers and 5,600 losers, but most notably, only about 140 stocks are hitting new highs.
I'm tightening up stops and waiting for some buying opportunities to develop. One opportunity that I see is AST SpaceMobile ASTS. ASTS is a satellite designer and manufacturer based in Midland, Texas. It is building what should be the first and only space-based cellular broadband network accessible directly by standard smartphones. The ultimate goal is to eliminate gaps in connectivity and provide uninterrupted cell phone coverage across the globe.
If ASTS is successful, there will be a dramatic shift in the cell phone industry, but it is going to take a huge investment in satellites, spectrum, and technology to reach its goal. The company has been making progress, and I believe that the stock has significant upside over the next few years as its services become commercially available.
I've held a small ASTS position for a while and wanted to set forth the way in which I plan to approach the stock. The stock is trading down close to 15% on Thursday morning after announcing a $400 million offering of 4.25% convertible bonds. It isn't a big surprise that the company is raising capital, and this looks like a fairly good deal, but offerings almost always trigger knee-jerk selling, no matter how well they are anticipated.
I view the drop as an opportunity to start to ramp up my position and develop a strategic plan. First, let's take a look at the chart.
As you can see, the stock had a furious run higher as it signed contracts with companies like Verizon VZ, launched its initial satellites, and gained spectrum. The stock has been in a downtrend since a euphoric spike to $39 and is now trading about 50% lower after a long downtrend. The drop on Thursday takes it close to its 200-day simple moving average, which should serve as some support.
My game plan is to ramp up my position on this weakness. The news is not surprising, and I expect a rebound, but I'm willing to be patient as it builds some support. I will flip some for a fast gain if the opportunity arises, but the key will be other upcoming catalysts.
The company expects to launch more of its BlueBird commercial satellites later in 2025 and will finalize deals for long-term bandwidth access. It is developing chips and should have initial beta service testing for AT&T T and Verizon late in 2025.
I view the drop on financing news to be a good opportunity to become more active in trading it as things unfold in 2025.
At the time of publication, DePorre was long ASTS
