Gogo Inc.

GOGO Details

Gogo Inc. (NASDAQ: GOGO) is the world's leading provider of business aviation broadband connection services. It designs, builds, and operates specialized air-to-ground (ATG) networks, engineers and maintains proprietary hardware and software in-flight systems, and provides aviation partners with configurable connectivity and wireless entertainment services. GOGO earns money by selling equipment and services, including narrowband satellite-based phone and data services, made possible by agreements with satellite providers.

Latest News:

• Record Business Aviation Flights: On November 16, 2021, GOGO reported that its AVANCE L5, a business aviation broadband connectivity system, has flown on more than 500,000 flights since its August 2017 launch. Its customers are using 44% more data per flight than Pre-Covid levels. There are already over 1,500 aircraft flying with an AVANCE L5 system onboard, and the L5 system has consumed 273.7 terabytes of data throughout half a million flights.
• Strategic Collaboration: Duncan Aviation, the most considerable maintenance and overhaul service provider in the US announced on November 2, 2021, that it is currently providing engineering and certification services to GOGO to complete the first-article Supplemental Type Certification (STC) for the Gogo 5G system.

9MFY21 Results:

• Progress in Topline: GOGO reported a 26.72% increase in total revenues to USD 243.42 million during 9MFY21 (ended September 30, 2021) from USD 192.08 million during 9MFY20, due to a rise in both services and equipment revenues.
• Decline in Losses: GOGO witnessed a decrease in net losses to USD 65.97 million during 9MFY21 from USD 250.88 million during 9MFY20.
• Cash & Debt Position: The company's cash and cash equivalents were USD 133.23 million as of September 30, 2021, with total debt of USD 806.12 million.

Key Risks:

• Dependence on OEMs: Contracts with OEMs and aftermarket dealers accounted for more than 90% of its equipment revenue in each fiscal year. Its operations and financial position could be impacted if one or more significant OEMs or dealers end their association with the company or if its contract expires and is not renewed.
• Supplier Concentration Risk: The antennas and modems for all systems and the equipment utilized `at GOGO's ATG cell site base stations are among the components for which it relies on single-source vendors. If the firm cannot continue engaging suppliers with the competencies or capacities required by its business, or if such suppliers fail to supply quality equipment and services in sufficient quantities, its operations and cash flows could be harmed.

Outlook:

• FY21 Estimates: GOGO estimates FY21 revenues to be around USD 325-335 million and adjusted EBITDA to be approximately USD 140-145 million, according to its Q3FY21 press release. GOGO expects free cash flows to be at least USD 40 million and capex to be at the low end of the previously forecast range of USD 20 to 25 million, with Gogo 5G accounting for most of the spend.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GOGO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GOGO's share price has fallen 1.89% in the past month and is currently trading around the mid-band of the 52-week range of USD 9.11 to USD 19.49. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 48.27. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.50.

Considering the company's growth prospects, recent collaboration, strong tailwinds of activity, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 13.52, up 0.82% as of December 21, 2021, 9:44 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Retractable Technologies, Inc.

RVP Details

Retractable Technologies, Inc. (NYSE: RVP) is a designer and manufacturer of safety syringes and other medical safety devices for the healthcare industry. VanishPoint's products include insulin syringes, tuberculin syringes, allergy antigen syringes, blood collection tube holders, tube adapters, allergy trays, IV safety catheters, VanishPoint blood collection set, and needles. It offers VanishPoint autodisable syringes over the world in addition to its other items. As of December 21, 2021, the company’s market capitalization stood at USD 252.22 million.

Latest News:

• Payment of Dividend: On September 30, 2021, RVP announced that it had declared USD 39,050 in dividends to Series II Class B Convertible Preferred Stockholders. The quarterly dividend is USD 0.25 per share, paid on October 22, 2021, to preferred shareholders of record on October 12, 2021.

Q3FY21 Results:

• Surge in Topline: The company reported an increase of 34.20% in sales to USD 36.36 million in Q3FY21 (ended September 30, 2021) compared to USD 27.09 million in Q3FY20, attributable to growth in the Syringes segment.
• Decline in Profitability: Net income for Q3FY21 reduced 41.28% YoY and stood at USD 6.46 million compared to USD 11.01 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 29.95 million and total debt of USD 2.17 million.

Key Risks:

• Supplier Concentration: In Q3FY21 and Q3FY20, the company obtained approximately 91.9% and 80.5% of its products from its Chinese manufacturers. As a result, delays in receiving the required amount or unfavorable costs from Chinese manufacturers could skew its output, severely compromising its overall operational situation.
• Customer Concentration Risk: The US government accounted for 93.7% and 94.2% of net sales in Q3FY21 and Q3FY20, respectively. RVP anticipates that the US government will remain a key client until March 2022. Such over-reliance on specific clients for business may be detrimental to its financial health in the long run.

Outlook:

• Capex Guidance: To help expand its current administrative offices, RVP has recruited a construction company and an architect. The expansion will cost approximately USD 5.0 million and will be completed by the H1FY22.

RVP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

RVP's stock price has declined 43.20% in the past nine months and is currently trading close to the lower band of its 52-week range of USD 6.57 to USD 21.50. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 40.35.

Considering the company's track record, high profitability margin, consistent dividend yield, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 7.31, down 2.14%, as of December 21, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.