Tech Stocks Are Down Big, but This Fool's Still Avoiding Gogo, Inc.

There's no question that tech stocks have had a rough couple of weeks. Between mid-March and mid-April, the Nasdaq Composite Index fell just a shade under 10%. While that's painful enough for investors, some stocks took the hits to the chin harder than others.

While looking for deals in the area, Motley Fool contributor Brian Stoffel considered buying shares of Gogo, Inc.  (NASDAQ: GOGO  ) , the only pure play on Internet connectivity for airlines and their passengers. Shares of the company are trading a full 50% below their year-long highs.

While Brian concluded that Gogo represented a solid business with a stable future, he's not going to be buying shares anytime soon. To find out why, check out the video below.

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Source: Gogo.


Read/Post Comments (9) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On April 22, 2014, at 10:21 AM, chivalry66866 wrote:

    It's ok Brian. Sit on the fence while the rest of us make money on this. :-)

  • Report this Comment On April 22, 2014, at 11:00 AM, BeagleBrigade wrote:

    So Brian's thesis is, don't invest until it's a proven profitable business and all the dust has settled. Sounds like a great way to make a small amount of money.

  • Report this Comment On April 22, 2014, at 12:05 PM, reelfool wrote:

    one major flaw in Brian's analysys: he only looks at % of airplanes enabled as the revenue driver, when it is USAGE on those planes that drives GOGO revenues, and the current usage of inflight internet services is only around 10% or less of capacity, meaning there is substantial room for revenue growth inside GOGO's current deployment model.

  • Report this Comment On April 22, 2014, at 12:24 PM, jtd04cc wrote:

    How can a former middle school teacher and avid blogger possibly be wrong about giving investment advice?

  • Report this Comment On April 22, 2014, at 12:35 PM, TMFCheesehead wrote:

    Thanks for the responses.

    To be clear, I think it's a good business, but am not comfortable with the stock. I'd have to see something that would convince me that usage would increase markedly from where it is now.

    With Internet available to anyone with a mobile (laptop) device already, what's the driver for further adoption on a flight moving forward?

    These are the questions, along with a definite ceiling in terms of aircraft, that give me pause.

    Best,

    Brian Stoffel

  • Report this Comment On April 22, 2014, at 1:47 PM, BeagleBrigade wrote:

    Brian, I think the answer to your question is driven by price for bandwidth. GOGO is working to solve the bandwidth issue with upgrades such as ATG4 and 2Ku. It has to mentally sit well with the passenger that they are getting their money's worth. In my opinion, GOGO does not deliver the performance for the price today but will once these technologies come online across the fleets. I'm sure once GOGO delivers more megabits to the passengers, it will ramp up it's marketing campaign and you could even see some agreements with the major telecoms to give their users access onboard a GOGO flight that hits their data plans for example. It doesn't make sense for GOGO to market aggressively while they still cannot sufficiently satisfy today's bandwidth demands. As a traveler, I have never heard the flight attendents even mention a flight was wirelessly equipped. This is where the top line growth story begins.

  • Report this Comment On April 22, 2014, at 6:16 PM, reelfool wrote:

    I agree with BeagleBrigade 100%: as a traveler, the GOGO use/plan/bandwidth story is not there yet; but the enabling upgrades are coming and the necessary components are clear. This is a technology-adoption play, not a mere deploy-and-saturate situation, so the winners are going to be those who see this BEFORE the usage growth numbers make it obvious.

  • Report this Comment On April 28, 2014, at 4:25 PM, snowday97 wrote:

    LOL, brian, GOGO plunge after hour over -10% haha, should have waited to post this article til next day.

  • Report this Comment On April 28, 2014, at 5:38 PM, TMFCheesehead wrote:

    @snowday97-

    Didn't see that one coming from AT&T.

    Brian Stoffel

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