In-flight Internet service provider Gogo Inc. (GOGO) reports earnings in a couple of weeks, but that report has been relegated to the back pages today. That’s because AT&T (T) and Honeywell (HON) just challenged Gogo to a dogfight, and GOGO stock — already mired in big losses prior to today — is reeling hard.
AT&T announced today that it will be partnering with Honeywell to deliver in-flight Internet services — Gogo’s bread ‘n’ butter. Specifically, Honeywell will help provide some of the hardware, which will utilize AT&T’s LTE network to bring airline passengers 4G service.
The big challenge to Gogo: According to Bill Kircos, Honeywell’s vice president of global communications, “passengers should see faster and more consistent broadband connections and speeds while flying.” That’s a potentially huge change from the current environment, as Gogo’s service is only used by about 6% of customers on Gogo-enabled planes. (Which is good, because the company has admitted it doesn’t have the technology to service a full plane without bandwidth becoming an issue.)
While the AT&T-Honeywell product will offer broadband service, the technology still won’t hook customers up with AT&T’s network for voice service, nor will people be attached to their own data plans.
Gogo stock was off some 25% late Tuesday, bringing its year-to-date losses to around 45%.
However, there’s at least one good reason to think the selling in Gogo stock might be wildly overdone, at least in the short term.
Namely, Gogo is contracted out with several airlines — including Delta Air Lines (DAL) and American Airlines (AAL) — through 2020. Even William Blair senior analyst James Breen said of the new competition, “I don’t think it has an impact on Gogo’s results over the next 6 to 7 quarters.”
Plus, as Grant Martin over at Forbes points out, Gogo is bringing several new technologies into the market — specifically, ones that will allow for better speeds — which could help keep the AT&T-Honeywell solution from being a clear-cut better option for airlines once those contracts run out.
Today’s dip brought Gogo stock below just about every meaningful moving average, so in the extremely short term, GOGO could have even further weakness ahead.
Still, Gogo has oodles of time to respond, and GOGO stock is sitting almost 60% off its December high-water mark since its 2013 IPO.
A dip is certainly in the making. Those willing to make a speculative bet after a little stabilization on the part of GOGO could make out once the market realizes Gogo hasn’t actually been sentenced to death yet.