$GOGO is the Best Airline Play Ever

I don’t think there has ever been a stock, aside from Skymall, that was tethered to the airlines and enjoyed high growth. Airlines are great businesses, if it wasn’t for the damned employees and fuels costs. A customer that is literally a prisoner for at least 2 hours, with nothing to do but surf the web, is a dream come true for an internet service provider, like GOGO.

Wait until they let you text from airplanes. Can you imagine the type of growth his company will undergo?

The only question is, considering it’s a new company and we don’t know much about management: what is it worth?

Typically, in these circumstances, it’s best to compare to peers.

Will GOGO ramp up growth and become a coveted “social media” stock, like YELP, LNKD or TRLA?

If so, the stock needs to trade at about 15X sales or $45 per share.

What if GOGO turns out to be a loser, like GRPN or ZNGA? Well if that’s thew case, the most severe valuation tags GOGO at around $8 per share?

Sounds like a gamble, no?

However, internet service providers, historically, have predictable revenue streams, unlike online coupon and gaming schemes.  In my estimation, based upon the information available to me now, considering new products launches and expansion into international flights, GOGO should be trading 10x sales, or $31 per share. With the stock at $14 and change, you’re laughing at me now. But, mark my words, if GOGO exceeds earnings next quarter, the stock will get there in a heartbeat.

Having said that, this was a bad IPO. It broke syndicate, like FB, on the first day and plenty of people want to sell. Look for some resistance at around $16-17. When it clears $17.50 or so, in my opinion, it’s a straight show for $20.

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