UBS Emphasizes Gogo's "Attractive Play" in Wireless Data, Upgrades to Buy

In a report published Monday, UBS analyst John Hodulik upgraded Gogo, Inc. GOGO from Neutral to Buy and lowered the price target from $26.00 to $23.00 following first quarter results. Gogo's first quarter revenue and margins beat UBS's outlook, causing the analyst to reevaluate estimates. Hodulik remarked on the company's Business Aviation results, which continue to show strength. The analyst raised FY 2014 estimated total revenue from $413 million to $416 million. He additionally lowered FY14 EBITDA from $15.7 million to $15.5 million and increased expected cash capex from $120 million to $122 million. UBS is wary on 2015 estimates and beyond given expected costs to roll out Ground to Orbit and 2Ku, and probable pricing pressure and competition from AT&T's T announcement to enter the in-flight entertainment market. Due to these factors, Hodulik lowered 2015 and 2016 estimated EPS from ($0.12) and $0.60 to ($0.29) and $0.39, respectively. The analyst concluded, "We think Gogo represents an attractive way to play the growth in wireless data, given its long-term airline contracts and consumers' desire to be constantly connected." Shares of Gogo closed at $13.68 on Friday and are currently trading up 8.63 percent at $14.86.