Why GOGO Shares were up Friday
Gogo Inc (NASDAQ:GOGO) have been on a downturn ever since they reported earnings Aug 11th. The results weren't that bad, they were actually good. However when you are a growth stock that has a large short interest if you don't kill expectations you are destined to fail.
Why did Gogo shares bounce Friday? Simple. They were overdue and buyers stepped in.
Gogo shares were at $16 before earnings then $2 the next day after the results didn't impress Wall Street. GOGO shares didn't breakout past $15 until yesterday (they did on Aug 11th but dippped right back to the $14 level). Short interest is at 22% of the float and it won't go away anytime soon.
Friday GOGO shares were just under $15 and closed up 6% to $15.81. The recovery was due as GOGO shares attempt to return to the $16 level pre-conference call. The conference call on Aug 11th Gogo Inc lost $0.22 per share, a penny better than analysts expected while revenue of $99.50 million came in $0.1 million better than expected. Net loss for the quarter improved to $18.7 million from $72.6 million a year ago.
The stock did not take off due to the fact that Gogo expects its full-year EBITDA to be toward the lower end of its prior $8 million to $18 million range due to higher spending to obtain certain certificates for its international service.
Mastery agrees with the UBS analyst who set a $23 PT after the call
(Benzinga.com) UBS: Growing pains continue
John Hodulik of UBS believes that Gogo is going through a phase of “growing pains” as the company's investments in its international segment will hurt the bottom line.
Despite near-term “growing pains” Hodulik noted that Gogo's international operation looks promising with 19 planes flying at the end of the second quarter with an estimated 50 to 100 planes operational by the end of 2014. International backlog is more than 300 planes, the vast majority of which should be flying by the end of 2015.
Hodulik lowered his full-year revenue outlook to $412.9 million from a previous $415.6 million while his full-year EBITDA estimate is now lowered to $10.2 million from $15.5 million. Accordingly, the analyst lowered his full year 2014 EPS estimate to a loss of $0.99 from a previous loss estimate of a $0.91.
Looking forward, Gogo Is now expected to lose $0.39 per share in full year 2015 and will earn a profit of $0.31 per share in 2016.
Shares are Buy rated with a $23 price target.
Bottom line: Expect volatility if you are going to trade GOGO. It appears the bottom is in but a smooth ride is not in the trip.
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