Here's Why Gogo, Inc. Shares Will Soar 65%

Does this analyst make a good case? Or is it just more noise from Wall Street?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 17, 2014 at 2:06PM
Technology and Telecom

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Gogo, Inc. (NASDAQ:GOGO) popped 4% today after JPMorgan upgraded the in-flight Internet connectivity technologist from neutral to overweight.

So what: Along with the upgrade, analyst Philip Cusick planted a price target of $28 on the stock, representing about 65% worth of upside to yesterday's close. So while momentum traders might be turned off by Gogo's price weakness in recent months, Cusick's call could reflect a strengthening sense on Wall Street that its growth prospects are becoming too cheap to pass up.

Now what: According to JPMorgan, Gogo's risk/reward trade-off is rather attractive at this point. "Gogo is currently the largest communication service provider in Business Aviation -- it has 5,175 satellite units (mostly voice only) and 2,047 [air-to-ground] units online," noted Cusick. "We continue to believe Gogo's ATG suite has significant advantages over satellite connectivity alternatives in BA due to lighter equipment, overnight installation and faster speeds. We expect ATG adds and shipments to remain strong through 2014 while satellite demand only gradually slows over time." When you couple that positive outlook with Gogo's price weakness of late, it's tough to disagree with JPMorgan's upgrade.