Gogo Delays 5G Launch To 2022, Posts Surprise 4Q Profit; Shares Sink 8%

Gogo swung to a surprise profit in the fourth quarter. Meanwhile, the world’s largest provider of broadband connectivity services for the business aviation market, saw revenues in the reported quarter decline 10% year-over-year.

Despite the surprise profit, shares dropped 1.7% in Thursday’s extended trading session after closing 8% lower on the day, after the company said it needed to delay its planned 5G network launch from 2021 to 2022. Gogo (GOGO) cited the chip shortage crisis worldwide as the reason for the delay.

Gogo CEO Oakleigh Thorne said, “we’ve gotten ourselves caught in the world chip shortage crisis here a little bit and the demand is hitting chip manufacturers in this just one manufacturer in particular, that’s a supplier to one of our partners in the 5G project that had to go back and retake a chip and had to get back in line behind the whole bunch of other demand.”

“And so that’s the way that’s pushed us into 2022. It doesn’t affect L5 at all. It’s a 5G chip,” Thorne added.

Gogo reported 4Q earnings of $0.01 per share, compared to the loss of $0.27 per share during the same quarter last year. Analysts had expected the company to report a loss of $0.32 per share.

Total revenue fell 10% to $77.6 million but topped analysts’ estimates of $69.09 million. The negative impact of COVID-19 on demand for air travel impacted revenues, the company said.

Service revenue came in at $56.9 million in 4Q, down 3% year-over-year, mainly due to a 4% fall in average monthly connectivity service revenue per ATG aircraft online (ARPU). Equipment revenue of $20.7 million plunged 24%. Additionally, adjusted EBITDA was $19.3 million, down 46.7%. (See Gogo stock analysis on TipRanks)

“We plan to invest in improving the performance of our proprietary ATG network and driving market penetration of our AVANCE platform, positioning us well to introduce valuable add-on services such as Gogo 5G, and other new technologies as they evolve,” Thorne said.

For 2021, the company projects total revenue in the range of $300 million to $320 million. Adjusted EBITDA is anticipated to land between $105 million and $120 million.

Following the 4Q results, Raymond James analyst Ric Prentiss maintained a Hold rating on the stock.

The analyst said, “Visibility has improved greatly for GOGO with the December 1st sale of the Commercial Aviation (CA) business to Intelsat, and the exclusive focus on Business Aviation (BA) that has been resilient during the COVID-19 pandemic.”

Overall, the stock has a Hold consensus rating based on 3 Holds versus 1 Sell. The average analyst price target of $11.50 implies that shares are more than fully valued at current levels. Shares have increased 24.3% over the past six months.

According to TipRanks’ Smart Score system, Gogo gets a 6 out of 10, which indicates that the stock is likely to perform in line with market averages.

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