Macquarie Prefers Global Eagle To GOGO

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Macquarie initiated coverage on GOGO GOGO Tuesday at Neutral with a $21 price target (15.8 percent upside).

One of the first notes in the research report is that Macquarie prefers Global Eagle ENT to GOGO. Other than competition, high capex and limited content are reasons why Macquarie is wary of GOGO.

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Regarding competition, analyst Andrew Degasperi writes, “Gogo’s iron-clad 10-year agreements are likely to shield the company somewhat as it upgrades its technology but the launch of AT&T 4G LTE service in 2015 could impact future agreements and increase opex. We estimate sales and marketing expenses will increase 1-2% of revenue by 2016.”

Further, “Gogo’s cash capex intensity of 20%+ of revenue relative to Global Eagle’s ~4% will lead to significant cash burn through 2016.”

With GOGO trading at 11 times 2016 EV/EBITDA, Degasperi prefers Global Eagle, which currently sits at a 40 percent discount to that ratio. The $21 price target on GOGO is based on 12 times 2018 EBITDA.

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Posted In: Analyst ColorPrice TargetInitiationAnalyst RatingsAndrew DegasperiMacquarie
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