SpaceX (SPCX) Starlink Mobile Faces a 'Stubborn Physics Problem,' Bernstein Warns

SpaceX (SPCX), the private space and satellite communications company behind Starlink, may have a huge opportunity in mobile service, but Bernstein's five-star analyst Douglas Harned says investors should be careful about assuming satellites can replace traditional wireless networks anytime soon. In a new report, Harned kept its Outperform rating on SpaceX and a $248 price target, while taking a much more cautious view of the company's planned direct-to-device mobile business.

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SpaceX is expected to begin expanding Starlink Mobile by late 2027, targeting a market that Bernstein estimates at more than $300 billion in annual U.S. mobility revenue. The problem is that connecting a normal smartphone directly to a satellite is much harder than connecting it to a nearby cell tower. "Distance, however, remains a stubborn physics problem, even at low-earth-orbit," Bernstein analysts wrote.

A terrestrial cell tower may sit only a few kilometers from a phone, while a Starlink satellite can be hundreds of kilometers away. That weakens the signal and creates problems with upload speeds, indoor coverage, antennas, and battery life. Phones may also need to transmit at higher power to maintain a satellite connection, which can drain batteries faster.

Meanwhile, SPCX shares rose 2.22% on Friday, closing at $136.97. The stock is still down about 15% since its June IPO.