UBS Puts AST SpaceMobile Stock on Hold. The Shares Fall to Earth.

AST has deals to provide satellite connection to the phones of dozens of carriers around the world. (Andrew Kravchenko/Bloomberg)

Shares of AST SpaceMobile were down as much as 11% Tuesday morning, to $36, after UBS Securities downgraded the stock from Buy to Hold. The brokerage firm greatly reduced its price target, to $42 from $62.

AST is a pure-play start-up in a crowded field of satellite operators aiming to offer voice and broadband services to everyday smartphones in areas beyond the reach of cell towers. Unlike early satellite-phone service from ventures such as Iridium Communications, the planned direct-to-cell services won’t require specialized handsets. On Monday, AST’s main rival, the Starlink unit of Elon Musk’s SpaceX, bought a $17 billion swath of wireless spectrum from EchoStar , heightening Starlink’s competitive advantage.

“While we still believe the market opportunity will support multiple players [in the long term], we believe the newly announced spectrum deal between EchoStar and Starlink enhances the positioning of AST’s primary competitor and creates added execution risk,” wrote UBS analyst Christopher Schoell in his Monday note.

AST has deals to provide satellite connection to the phones of dozens of carriers around the world, including AT&T and Verizon Communications in the U.S. But it can now provide only intermittent coverage with the five satellites it currently has. It will need 45 to 60 of them to provide round-the-clock coverage. AST stock traded as high as $60 this year, when the company announced it had the funds to deploy up to 60 satellites.

Today’s drop in AST’s price brings it back near the levels it traded at in February, when a Barron’s story questioned whether AST and its partners will be able to find hundreds of millions of subscribers who are willing to pay a premium for a feature that’s nice, but not a must-have. AST’s challenge grew yesterday, as Starlink boosted its commitment to direct-to-cell service—which its thousands of satellites will offer—in addition to its internet service, which already has 6 million customers worldwide.

Monday’s spectrum transaction signals Starlink’s commitment to scaling its broadband and voice service, wrote Schoell, and enhances its rocket-launch advantage with multiple spectrum bands. As part of the deal, EchoStar dropped plans to provide its Boost Mobile customers with satellite coverage from Canada’s MDA Space; it will use coverage from Starlink instead.

UBS’ Schoell thinks AST will reach profitability by 2027 and achieve revenue of $3 billion in 2030, with earnings per share of $4.19. The 2030 numbers are down from his prior estimates of $3.6 billion and $5.29, but UBS still holds out hope.

“We still believe AST will be a leader in the emerging space-to-cellular broadband market,” Schoell wrote.

Write to Bill Alpert at william.alpert@barrons.com