By Carly Forster
Gogo Inc (GOGO) is a leading aircraft communications service provider to the global aviation industry. Following a better-than-expected quarterly report, Gogo Inc (NASDAQ:GOGO) has been one of the top performing stocks in May. Reporting a 35% jump in quarterly revenue GOGO’s Chief Executive Michael Small outlined the company’s plans for the coming quarters, and beyond. Looking ahead, the company is transitioning to a much faster satellite-based-system. Currently, Gogo Inc (NASDAQ:GOGO) provides satellite-based WiFi for flyers connected to the web across both land and sea. While AT&T Inc. (NYSE:T) announced plans to provide a 4G LTE platform for in-flight customers, Small dismissed any threat that this might poise, citing regulatory hurdles, the high switching-costs for airlines, and the increasing demand for seamless in-flight connectivity (AT&T’s service would only work across land).
Looking forward, Small announced that the company has received an STC from the FAA and certification from the Japanese Civil Aviation Bureau (JCAB) to install GOGO’s connectivity service on Japan Airlines’ 767-300 aircraft. This is in addition to the current contract GOGO has with the Delta Air Lines, Inc. (NYSE:DAL) global fleet. In addition, Gogo Inc (NASDAQ:GOGO) will now be able to offer speeds of up to 70 megabits per second to Delta customers and is scheduled to upgrade 800 of Delta Air Lines, Inc. (NYSE:DAL)’s 2,056 aircraft in 2014 with much newer technology, tripling the connectivity to 10 mbps.
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Following impressive figures, and among worry from potential competitors such as AT&T, analysts weighed in what they recommend for GOGO stock. While one analyst ranks supreme and enters the TipRanks Hall of Fame, another analyst must suffer the embarrassment of having entering this month’s Hall of Shame.
Hall of Fame:
UBS analyst John Hodulik correctly foresaw the strength of Gogo Inc (NASDAQ:GOGO) following their quarterly earnings report and recommended BUY on May 19. While Hodulik lowerd the price target from $26.00 to $23.00, he raised FY 2014 estimated total revenue from $413 million to $416 million, lowered FY14 EBITDA from $15.7 million to $15.5 million, and increased expected cash capex from $120 million to $122 million, explaining that “We think Gogo represents an attractive way to play the growth in wireless data, given its long-term airline contracts and consumers’ desire to be constantly connected.” This recommendation brought Hodulik a +26.4% return, helping bring his average return for this stock to +56.8%
Hodulik has an overall average return of +16.9% and a 76% success rate.
Hall of Shame:
Not every analyst was able to see the strength of Gogo Inc (NASDAQ:GOGO)’s latest report. Following the earnings call, Morgan Stanley analyst Simon Flannery recommended SELL GOGO on May 14, explaining that while “first quarter results were better than estimated, but unlikely to remove the overhang from the recent AT&T Inc. (NYSE:T) announcement to launch an in-flight connectivity service, while the company continues to burn through cash. Reiterate UW, lowering the base case of $11, to reflect potential competition.” This SELL recommendation has hurt Flannery’s average return on the stock. Loosing -36.4% with this recommendation, his overall average return for Gogo Inc (NASDAQ:GOGO) has dropped to +4.9% after four recommendations. If he keeps loosing percentages like this, how long do you think the average will stay above 0?
Overall, Flannery has a -3.0% average return and a 54% success rate.
Carly Forster writes about stock market news. She can be reached at [email protected]