Starlink's competitor rose in price by 254%. Why does the analyst expect a "painful correction"?

Scotiabank downgraded the shares of satellite infrastructure developer AST SpaceMobile and now, in fact, recommends selling them. The analyst pointed to signs of overinflated value of the securities and the risk of "painful corrections" after their growth of 254% in 2025. According to Scotiabank, delays in launching a new satellite or the failure of a mission in India could weaken the company's position in a situation where Elon Musk's SpaceX is actively imposing competition in the satellite communications market.

Scotiabank analyst Andres Coelho downgraded shares of satellite infrastructure developer AST SpaceMobile from Sector Perform ("on par with the sector", essentially a neutral assessment) to Sector Underperform ("worse than the sector"), Bloomberg reports. The target price set by Coelho is $42.9, which implies a drop of more than 43% from the closing level on Oct. 7.

At that, trades on Tuesday ended with growth by 2.5%. At the pre-market on October 8, the securities rose in price by about 1.3%.

The analyst said AST could face "painful corrections" given the ambition of Starlink - a unit of Elon Musk's space company SpaceX - to overtake its rival in the smartphone satellite market.

"Amid an impressive bull market, the extreme volatility of recent days has led to what we believe is a valuation bubble," Coelho wrote in a note cited by Bloomberg.

The key threats to AST now are possible delays in the launch of the Block 2 Bluebird (FM1) satellite or problems in launching from India, Scotiabank warned. Block 2 Bluebird (FM1) is one of the second generation satellites that should significantly increase network capacity. They are designed for a bandwidth of up to 40 MHz and promise data rates of up to 120 Mbps. If one of the above scenarios is realized, it is Starlink that will win, Scotiabank noted.

More than 2 billion people around the world still do not have access to high-speed internet. Against this background, Starlink and AST SpaceMobile are competing to create networks capable of directly connecting cell phones to broadband Internet via satellites - especially relevant during disasters and military conflicts, Bloomberg writes .

AST SpaceMobile has emerged as one of the notable players in direct satellite connectivity to smartphones, which has generated a lot of investor interest. However, it faces intense competition from Starlink. In September, SpaceX announced that the next generation of Starlink Direct-to-Cell satellites will utilize an expanded frequency range, increasing capacity by more than 100 times over current satellites and providing full 5G connectivity in almost any environment.

In addition, Elon Musk's company last month acquired wireless frequency spectrum from EchoStar for $17 billion, Bloomberg added.

AST SpaceMobile shares have more than tripled since the beginning of the year - by 254% - amid an intensified race for leadership in satellite mobile communications. Over the past month, the securities have added about 83%, and the company's market capitalization has reached $27 billion.

AST stock has six "buy" recommendations, four "hold" recommendations and one "sell" recommendation, according to data compiled by Bloomberg.

This article was AI-translated and verified by a human editor