When Gogo (GOGO) came public in early June, the performance was pretty ugly. The company, which operates the Gogo Inflight Internet system, saw its shares fall 6% on its debut. But since then, GOGO stock has had a nice rebound, up about 114%.
In fact, GOGO stock is up around 3% so far today, in addition to posting a nearly 10% climb on Tuesday.
Let’s take a quick look at whether the Gogo Inflight Internet system deserves the hype, and whether GOGO stock is a buy after doubling since its IPO.
GOGO Stock – Solid, But Expensive
The Gogo Inflight Internet system is the world’s leading platform. It allows for access to Wi-Fi-enabled devices, premium movies and games. Plus, passengers can also text and make voice calls. On top of that, Gogo also has snagged some major customers like Delta Air Lines (DAL), US Airways (LCC), Virgin America and United Airlines (UAL). Such credibility has helped provide interest in GOGO stock lately.
Growth has also been robust, as the Gogo Inflight Internet system continues to gain traction. During the latest quarter, revenues jumped by 48% to $85.4 million, which was above the Street consensus of $76.8 million. But the major boost to GOGO stock was the outlook. The company pegged full-year revenues at $325 million, up from the previous forest of $315 million.
GOGO stock has had some more catalysts since then, too. Perhaps the most important one came yesterday when the company announced that the Gogo Inflight Internet system received approval for the Boeing (BA) 747-400 aircraft. In other words, this means that the service will be available for international flights, which opens up huge growth opportunities.
The bad news, though, is that GOGO stock looks a bit frothy at these levels, with shares trading at about 9 times revenues. Kkeep in mind that there are still no earnings for Gogo.
Plus, the recent big gains were partly thanks to the fact that short sellers were scrambling to close their positions. Consider that about 18% of the GOGO stock float is in short positions.
Besides, the Gogo Inflight Internet has to fend off a variety of rivals like Panasonic (PCRFY), Row 44 and Viasat. So while it’s a solid company that should have a promising future , GOGO stock could suffer a pullback as the hype subsides.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.