Gogo Continues International Investment, Says Morgan Stanley

Morgan Stanley commented on Gogo Inc (NASDAQ: GOGO) Thursday and maintained an Underweight rating on the stock.

Analyst Simon Flannery noted that he “met with senior management - they are focused on capacity improvements from 2Ku, encouraged by international discussions, and excited by connected aircraft. However, it is unlikely that 2015 will be a turning point, and the company continues to burn through cash in the meantime.”

Flannery observed that with “airlines starting to commit to connectivity solutions, and the Delta international fleet providing a proof of concept, we may see a snowball effect over the next few years. However, after signing a definitive agreement, it takes at least 12 months to install the aircraft, so it may be a while before we see a meaningful impact to the financial results.”

The management views the connected aircraft as a $14 to $30 billion industry, according to the analyst note.

In conclusion, “Gogo will relocate to a new headquarters building in downtown Chicago in 2Q15, which will add some modest expense pressure. The revenue share will increase ~2 percent through the end of 2015, before we can expect to see a steady run rate.”

Gogo Inc closed at $16.35 Wednesday, up 2.44 percent.