Gogo, Inc. Earnings: What to Expect Thursday

Gogo (NASDAQ: GOGO  ) will release its quarterly report on Thursday, and investors have been hugely optimistic about the growth prospects for the in-flight Internet service provider, sending shares skyward since its mid-2013 IPO. Yet even though the company has successfully gotten itself onboard planes for Delta Air Lines (NYSE: DAL  ) , United Continental (NYSE: UAL  ) , American Airlines Group (NASDAQ: AAL  ) , and other carriers, the big question is whether Gogo can hold competitors at bay and maintain its huge 80% market share in North America.

For years, airplanes were the dark spot of the Internet world, where connectivity was unavailable and even phone service was limited to extremely expensive in-flight specialty phones. But the demand to stay connected has opened up a lucrative opportunity, and Gogo has jumped into the market to try to capitalize. As Gogo tries to make the most of its first-mover advantage, though, it needs to keep its eye on potential competition while cementing long-term deals to sustain its growth. Let's take an early look at what's been happening with Gogo over the past quarter and what we're likely to see in its report.


Gogo's test aircraft. Source: Gogo.

Stats on Gogo

Analyst EPS Estimate

($0.27)

Year-Ago EPS

($5.28)*

Revenue Estimate

$85.45 million

Change From Year-Ago Revenue

35%

Earnings Beats in Past 4 Quarters

2**

Source: Yahoo! Finance, S&P Capital IQ. * Unadjusted for change in shares outstanding after IPO. ** In two quarters since IPO.

Will Gogo earnings keep surprising investors?
Analysts have pulled back on the throttle on their views on Gogo earnings in recent months, keeping fourth-quarter estimates steady but widening loss expectations for the full 2014 year by about 5%. The stock has lost altitude recently, though, falling more than 30% since early December.

Gogo's third-quarter results brought positive momentum to the stock, with revenue climbing by almost half and its count of aircraft on which it offered its service having climbed by 24% to top the 2,000 mark. Positive guidance for full-year revenue was also encouraging, eclipsing its previous range of sales guidance by 3% to 6% and pointing to further long-term growth across the globe. So far, domestic airlines have been key partners for Gogo, with Delta, United, and American all offering the service on certain aircraft. But the company signed its first foreign partner, Japan Airlines, to a contract during the quarter, showing Gogo's intent to take full advantage of the international opportunity in its business as well.

But Gogo isn't counting just on providing Internet access for all of its prospective revenue. Gogo also got FAA approval to install its Ku-satellite technology onboard some Boeing aircraft, opening the door to its Gogo Vision in-flight entertainment service. With plans to offer exclusive video content, Gogo hopes to attract more customers to take advantage of its services. In addition, just last week, the company unveiled its in-flight phone platform, potentially opening the door to more readily available voice and text communication as well.

With these opportunities, a share-price decline might seem unwarranted. But in December, private equity firm Ripplewood Holdings distributed all 27.6 million shares of its Gogo stock to its limited-partner investors, opening the door to sales that immediately caused a 15% drop in the share price.

Nevertheless, Gogo continues to work hard to maintain its dominance. With huge investments of money and employee headcount in technology, Gogo has remained the biggest player in the industry despite challenges from Panasonic and OnAir. As its new products roll out, Gogo should become an even more compelling proposition for airlines, passengers, and investors.

In the Gogo earnings report, watch to make sure the company remains on target to meet its lofty goals. With so much growth potential, Gogo needs to make sure it wastes no time in building up an insurmountable presence in the new industry.

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