Miami, FL – January 3, 2019 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on GoGo, Inc. (NASDAQ: GOGO).

Things are turning out well for Gogo Inc. (NASDAQ: GOGO), a leading in-flight broadband Internet and entertainment provider based in Chicago. Its quarterly numbers are good, and the company signed a deal with Brazil’s biggest airline group, GOL Linhas Aereas. However, the bombshell came when it closed a convertible note offering, dragging investor sentiments. Does this mean that the stock has lost its relevance or surrendered the gains from its efforts? Could it be dubbed as overreaction to the offering or a knee-jerk reaction without looking at the long-term prospects?

Operational Efficiency

Recently, Gogo disclosed striking a deal with GOL, enabling the latter to become Gogo’s launch partner for its automated turbulence reporting, aircraft data service and wireless quick access recorder. Gogo believes that the partnership will improve its operational efficiency, while GOL will have access to real-time data and be able to streamline processes and generate new service opportunities. All these will come to fruition with the help of the firm’s 2Ku high-speed global satellite connectivity system. Being the vanguard as far as technology adoption in the aviation industry is concerned, GOL will enable Gogo to leverage aircraft data to improve its efficiency.

The move aims to go beyond passenger connectivity and connect flight attendants, pilots and the aircraft to enable airlines to have access to even more information on a real-time basis. Gogo’s president of commercial aviation, John Wade, thinks that this will improve not only efficiency but also safety and also offer better service in flight. The firm has been connecting flight attendants and pilots since 2014 and has developed other capabilities such as enablement, data management and operational solutions. These are meant to improve the passenger experience and attract frequent flyers, and Gogo’s alliance with GOL will help boost its efforts.

Q3 Results

Gogo’s third-quarter numbers were better than what the market expected. Its consolidated revenue grew 26 percent to $217.2 million. Service revenue growth accelerated to 5 percent in the third quarter on a year-on-year basis from 3 percent seen in the second quarter. Net loss has narrowed to $37.72 million from $45.28 million, representing an improvement of 17 percent. The main driver behind this is its Business Aviation division, which witnessed a 65-percent jump in profit. 

The better-than-estimated results enabled the company to reaffirm its 2018 total revenue outlook of $865–$935 million. However, the company has boosted its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) guidance to $45–$60 million from its previous forecast of $35–$45 million. But these positive factors were nullified by Gogo’s intention to issue a $215 million worth of convertible senior notes. This is meant to buy back the outstanding convertible notes totaling about $200 million. This is expected to have an impact on Gogo’s shares in the near term. However, the company is betting on the increase of its segment profit since it has taken initiatives to cut costs. This will help the company achieve its stated long-term objectives. 

Competitors

Ability Inc (NASDAQ: ABIL), a holding company providing geolocation, interception and cyber intelligence tools to law enforcement and security and intelligence agencies, is another company that closed a $10-million offering to an institutional investor by issuing 3.07 million shares at $3.25 a share. Following this, the price of stock reacted sharply toward the downside. However, the company is planning to use the funding for general corporate and working capital purposes, unlike Gogo’s plan of repurchasing convertible notes that would mature in 2020. Besides that, Ability has regained compliance with NASDAQ exchange’s minimum shareholder equity requirement. 

Another rival, telecommunication company Alaska Communications Systems Group Inc. (NASDAQ: ALSK), could witness close to three percent of revenue growth in the third quarter to $58.2 million. However, net income jumped to $1.8 million from $0.3 million in the same period last year. The company’s cash was boosted by the Rural Health Care program, an outreach program that helps healthcare facilities bring optimal medical care to rural areas through increased connectivity. The company believes that there is growth opportunities and reaffirms its outlook.

On the other hand, ADTRAN Inc. (NASDAQ: ADTN), a leading provider of networking and telecommunications equipment, is focusing on 10G fiber access solutions to scale next-generation business services. The company believes that this is the next wave to ride for network operators around the globe in order to meet their business needs. The company furthermore believes that it is a priority for service providers to expand the addressable markets. It will remain a competitive edge for the firm.

Conclusion

The reaction to Gogo’s offering is more of a short-term nature, and the long-term prospects are intact. Therefore, the sharp drop in prices could be considered a buying the opportunity especially since we believe today, and over potentially the next few days, GOGO’s shares will enter an oversold situation as many of the techs will be dragged down with Apple, Inc. (NASDAQ: AAPL). Look for a bounce and then a steady recovery to $5.50 – $6.00 per share over the next 6-12 months.

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