Gogo Inc is a Buy, says Roth Capital

It’s clear skies ahead for Gogo Inc (Gogo Inc Stock Quote, Charts, News, Analysts, Financials NASDAQ:GOGO), according to Roth Capital Partners analyst Scott W. Searle, who reiterated a “Buy” rating on the stock in a Wednesday update, saying Gogo is securing its long-term global leadership in the in-flight connectivity space.

Colorado-based Gogo, which provides in-flight connectivity (IFC) services to business aviation markets through its North American terrestrial air-to-ground (ATG) network, announced on Wednesday that it passed a critical 5G chipset design review and is now in the fabrication process, with delivery expected mid-year.

Gogo, which provides connectivity and in-flight WiFi to currently 5,700 aircraft, said its AVANCE platform give customers the ability to future-proof their in-flight connectivity investments through an easy upgrade to Gogo 5G and Gogo’s global Low-Earth Orbit (LEO) satellite-based product.

“The critical design review was an important process and milestone before entering into the manufacturing cycle,” said Mike Syverson, Gogo’s senior vice president of engineering, in a press release. “Given the challenges that our supplier experienced in 2022, we felt that passing this amount of review would give us the confidence necessary to deliver 5G in 2023.”

Searle called it a significant move for the company as it removes the 5G technology risk and makes for a long-term commercial roadmap and migration path for existing and new customers.

“With 45 per cent+ of the installed base utilizing 5G-ready Avance platforms and 30 supplemental type certifications (STCs) expected around the commercial launch, we believe that GOGO has reinforced its market leadership position,” Searle wrote.

Gogo last delivered earnings in November where its third quarter 2022 generated total revenue of $105.3 million, up 21 per cent year-over-year, with record equipment revenue of $30.1 million, up 43 per cent. Adjusted EBITDA was also a record at $43.7 million, up seven per cent year-over-year and up six per cent sequentially. (All figures in US dollars.)

For the upcoming fourth quarter results, Searle is expecting revenue of $105.3 million and EBITDA at $40.4 million, for a 2022 total of $401.3 million and $168.2 million, respectively. For 2023, the analyst is calling for $436.5 million in revenue and EBITDA of $161.4 million.

Searle said the new announcement negates concerns around Gogo’s technology migration to 5G.

“In fact, we view the 12-month delay as a non-event with the technology roadmap secure. Additionally, given the ease of Avance upgrades, we do not anticipate any slowing of current deployments,” he said.

With his “Buy” rating, Searle maintained a 12-month target price of $24.00, which at press time represented a projected return of 47 per cent.