Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Gogo Is Going Up

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

As the telecom industry settles into its first real price war in decades, some investors are nostalgic for the time when there was no significant competition and carriers had a captive audience. Well, there is one company forging new ground, but at 20,000 feet above sea level.

Strong target market, value proposition, and differentiation
  (NASDAQ: GOGO  ) provides Internet connectivity solutions to commercial airline passengers. The company started out providing voice service via handsets built into the seat backs, but has since expanded to offer Internet and mobile phone data and voice. The company is at the crossroads of a stabilizing industry, where it offers a new revenue source from a uniquely competitive position. Because Gogo aggressively built out a network of land-based towers, it got its foot in the door with the airlines.

This initial network offered a 3.1-megabit-per-second channel that was sometimes shared between multiple planes. Those network speeds wouldn't be capable of streaming movies, but big enough to send email or text your spouse when Chicago is snowed in again and you'll miss dinner, and maybe even breakfast.

Network acts as a wide moat
The key here is that the network is already built out. Unlike a Facebook or a Yahoo!, which can become a household name one feature at a time, Gogo is a national telecom. Telecom carriers don't have the luxury of scaling into a business -- they have to wire the whole region or there is no product. Since Gogo is marketing to airlines that traverse the whole country, they cant wire just one state or region and launch a service. It's all or nothing. This was a huge hurdle, but now that it's been accomplished, it's a huge competitive advantage, as it would be very difficult for a new company to try to enter the industry and compete effectively.

Lightly penetrated market
While the commercial airline market remains the core, in the near term the business fleet is the real opportunity. The cost to wire planes is approximately $10,000 per plane, but there is also a monthly fee for the service. To date, Gogo has wired 2,000 of the 20,000 fleet, leaving a tremendous near-term growth opportunity.

Ground floor opportunity
It's rare to get in on the ground floor of a technology company. As companies like Facebook and Twitter hit the market with valuations in the tens-of-billions, it's just too expensive to chase after them. Gogo is just starting to see growth accelerate in the market for business jets, and recent deal wins with Japan Air and Aeromexico are helping the company break into the international market. The company's $2 billion valuation is relatively low compared with other technology and telecom companies.

Pros are getting onboard
Professional investors see the opportunity and are starting to jump on board. On Friday, March 7, SAC announced a 5.1% passive position in the company. This is a new stake in the company by an investor known for its comprehensive due diligence. As its product line expands, market share increases, and earnings turn positive, I would expect other smart money firms to start appearing on the list of Gogo's institutional owners.

If you could only buy one stock this year, this would be it
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2869860, ~/Articles/ArticleHandler.aspx, 9/4/2015 3:13:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

David Eller

I started contributing to the Motley Fool in 2013. I have held research positions at two investment banks and two hedge funds before trying more entrepreneurial ventures. I'm passionate about helping people find freedom in financial independence. Feel free to add comments and start a discussion. I hope to use these articles as forums to learn from you as well as share my opinion.

Today's Market

updated Moments ago Sponsored by:
DOW 16,071.48 -303.28 -1.85%
S&P 500 1,918.96 -32.17 -1.65%
NASD 4,674.94 -58.56 -1.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 2:57 PM
GOGO $15.72 Down -0.18 -1.13%
GOGO INC CAPS Rating: ***