We came across a bullish thesis on Gogo Inc. (GOGO) on Substack by Pound the Rock Investing. In this article, we will summarize the bulls’ thesis on GOGO. Gogo Inc. (GOGO)’s share was trading at $7.03 as of March 3rd. GOGO’s trailing and forward P/E were 16.35 and 11.92 respectively according to Yahoo Finance.
A modern commercial jetliner in a busy terminal, emphasizing the importance of track and trace technologies.
Gogo (GOGO) is an exceptionally high-quality business facing near-term challenges but possessing strong long-term fundamentals. The stock has suffered due to management’s repeated delays in rolling out 5G capabilities, eroding investor confidence, and competitive fears surrounding SpaceX’s Starlink low earth orbit (LEO) connectivity. Each Starlink-related press release has triggered a selloff in Gogo, exacerbated by its failure to launch Galileo, its LEO product in partnership with OneWeb. Despite these setbacks, Gogo’s dominance in business aviation remains unchallenged, making its core business an extraordinary asset.
With over 90% market share in business aviation, Gogo benefits from a unique distribution advantage and exclusive ownership of the only air-to-ground (ATG) network in existence. The company has installed its systems in over 7,000 aircraft, with strong ties to OEMs ensuring placement in more than 70% of new jet shipments. The business jet market is growing at double-digit rates, with less than 30% penetration for reliable in-flight connectivity, presenting substantial runway for future growth. Business Aviation alone delivers EBITDA margins exceeding 40% and returns on invested capital above 30%, underscoring the strength of its competitive moat.
Beyond its earnings potential, a key near-term catalyst could unlock value. The anticipated announcement of 5G and LEO readiness in late 2025 would eliminate a major overhang on the stock. As investors regain confidence in Gogo’s execution and enduring market leadership, its highly recurring revenue base and low churn should command a valuation of at least 15x free cash flow. At this multiple, shares would double based on 2025 estimates, with further penetration and debt reduction pushing intrinsic value toward $30 per share by 2028, offering a compelling risk-reward opportunity.
Gogo Inc. (GOGO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held GOGO at the end of the fourth quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of GOGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.