Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Gogo Dropped Today

By Timothy Green - Mar 5, 2020 at 1:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Depressed demand for air travel is hitting the inflight internet stock.

What happened

Shares of Gogo (GOGO -1.03%) sank on Thursday, down 13% at 12:45 p.m. EST. There was no company-specific news for the provider of inflight internet services, so it's likely the stock is getting caught up in the turmoil sweeping the airline industry.

So what

The novel coronavirus outbreak that originated in China has gone global, with confirmed cases in dozens of countries. Demand for travel has taken a hit due to travel bans, event cancellations, and cautiousness on the part of consumers.

A declining chart arrow superimposed over stock prices

Image source: Getty Images.

U.S. airlines have begun warning about negative impacts from the outbreak. United Airlines plans to cut domestic flights by 10% and international flights by 20% next month, and it's frozen hiring for noncritical positions.   

Southwest Airlines has seen demand significantly decline in recent days, prompting the company to predict a $200 million to $300 million hit to revenue in the first quarter.

Now what

With Gogo's revenue dependent on usage of its services on aircraft, a slump in travel demand is not good news for the small-cap stock. It's possible the pain for airlines will be short lived, although it's also possible that demand for flights will be depressed for the next several quarters or longer.

Gogo is scheduled to report its fourth-quarter results on March 13. The company will likely provide an update on the outbreak's impact at that time.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gogo Inc. Stock Quote
Gogo Inc.
GOGO
$16.29 (-1.03%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.