Space Race

GE Aerospace (NYSE: GE) delivered a barn burner last night. For the fourth quarter, Analysts were expecting the company to report $1.04 in per-share earnings on $9.5 billion in revenue. GE’s actual numbers were $1.32 in earnings on $10.8 billion in revenue.

That’s a blowout. And GE has Boeing (NYSE: BA) to thank for it.

For starters, Boeing has repeatedly shot itself in the foot over the last couple of years. The net result has been massive production delays. So instead of having shiny new planes to upgrade their fleets, airlines are spending more on parts and labor to keep planes in the air. GE’s commercial engine and services division saw revenue jump 19% from the prior year to $7.65 billion.

But now, as Boeing ramps production back up, it’s ordering more engines, too. That’s a win-win for GE Aerospace. And it’s celebrating by boosting its dividend by 30% and says it will buy back $7 billion in stock during the fiscal year.

GE’s results are helping Boeing today, too. Because if Boeing is buying more engines than expected, that suggests its production ramp-up is going pretty well…

Good timing – I told you on Tuesday that Boeing was a good “Dogs of the Dow” rebound candidate for 2025…

The Final Frontier

Back in May 2024, the man we know as Hammer – Christian DeHaemer – did us all a great service when he clued us all into a stock that was breaking out of a long base. AST Spacemobile (NASDAQ: ASTS) is an upstart competitor to Elon Musk’s Starlink.

The company’s Yahoo Finance profile says:

AST SpaceMobile, Inc., together with its subsidiaries, develops and provides access to a space-based cellular broadband network for smartphones in the United States. Its SpaceMobile service provides cellular broadband services to end-users who are out of terrestrial cellular coverage. The company was founded in 2017 and is headquartered in Midland, Texas.

ASTS was trading for $8 a share when it lit up Hammer’s trading screen.

By mid-August, it was hitting $40 a share.

The stock traded mid-$20s for the last several months, until today. ASTS shares are getting crushed by 15%, down to $19.

The current price is a buying opportunity, and I’ll tell you why…

Last night, ASTS announced a convertible bond offering to raise $400 million. Now, a convertible bond is one that pays a dividend like a regular bond, but it’s also “convertible” because it can be converted to stock in the future, under certain circumstances.

Convertible bonds usually pay smaller dividends than regular bonds. That saves the company money and also gives investors added incentive if they are bullish on the company.

Now, when a small company raises money by selling stock, there’s a fairly predictable pattern. First, the company announces the offering and the stock price falls. It usually takes a couple of days for the company and the investors to determine the price at which the stock will be sold. Then, once the deal is done, the share price will rally toward the price at which the deal is done.

The bonds cannot be converted to stock until 2031. The conversion price is $26.99 – roughly 40% higher than where the stock currently trades. The company expects the deal to be closed by January 27. That’s Monday…

AST Spacemobile has a long-term contract with Vodafone for commercial satellite cell phone service through the Vodafone network that runs through 2034. That’s a different structure than Starlink, which uses its own hardware.

ASTS has already deployed five of its newest generation satellites, 60 more will launch this year and next (hence the need for cash). ASTS also has landed investments from AT&T, Verizon, Google, and the U.S. government.

I expect Elon Musk doesn’t see AST Spacemobile as a threat to Starlink. In fact, ASTS satellites are ferried into space on SpaceX rockets.

ASTS has already moved off its early lows. There’s likely a couple more dollars of upside coming when this deal closes.

Cheers,

Briton Ryle
Chief Investment Strategist
Outsider Club

X/Twitter: https://twitter.com/BritonRyle

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