Gogo Inc.

GOGO Details

Gogo Inc. (NASDAQ: GOGO) is a supplier of in-flight connectivity systems and services located in the United States. Aero communications, in-flight broadband, and wireless in-cabin digital entertainment systems are among the services provided by the company's subsidiaries to the aviation sector.

Latest News:

• Key Milestone: The completion of GOGO's seven-tower 5G testbed as part of the introduction of its statewide 5G Air-to-Ground (ATG) network was announced on January 20, 2022, by Airspan Networks Inc., a provider of ground-breaking, revolutionary software and hardware for 5G network solutions.

Financial Highlights: Q3FY21 Results (ended on September 30, 2021)

      Source: Company's Filing

• Top-Line Growth: The company's record total revenue of USD 87.17 million in Q3FY21, up 31.03% from USD 66.53 million in Q3FY20, was fueled by robust growth in both service and equipment sales.
• Turned into Profits: In Q3FY21, the company posted profits of USD 10.96 million compared to the loss of USD 80.12 million in Q3FY20, due to a substantial decrease in interest and increase in revenue line.
• Balance Sheet Strengthening: As of September 30, 2021, the total cash and cash equivalents were USD 133.23 million. Furthermore, total debt was USD 806.12 million on September 30, 2021, down from USD 1.17 billion on December 31, 2020.

Key Risks:

• Supplier Concentration Risk: The antennas and modems for all systems, as well as the equipment used at GOGO's ATG cell site base stations, are all supplied by single-source manufacturers. The firm's operations and cash flows might be impacted if it could not continue engaging suppliers with the skills or capabilities required by its company.
• Relying on OEMs: In each fiscal year, contracts with OEMs and aftermarket dealers accounted for more than 90% of its equipment income. If one or more significant OEMs or dealers quit their relationship with the firm, it might impact its operations and financial condition.

Outlook:

• FY21 Estimates: According to GOGO's Q3FY21 press release, FY21 revenues are expected to be about USD 325-335 million, with adjusted EBITDA of around USD 140-145 million. Free cash flows are expected to be at least USD 40 million, with capex at the low end of the previously estimated range of USD 20 to 25 million, with Gogo 5G accounting for most of the cost.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Stock Recommendation:

This year, the company has posted a growing quarter with solid customer demands and raising 2021 Adjusted EBITDA and Free Cash Flow Guidance. The stock price is currently squeezed its 50 and 200 DMA levels, and its RSI Index is ~49.46. The stock's 52-week high and low range is USD 19.49 to USD 9.18, respectively. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 15.37.

Considering the strong financials, key milestones, top-line growth, reducing debt, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 12.96, down 1.29% as of February 18, 2022.

Three-Year Technical Price Chart (as of February 18, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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