Why Gogo is Worth $20

NEW YORK (TheStreet) -- Gogo (GOGO) which provides in-flight Internet connectivity, could be worth $20 a share, according to one analyst, as the company continues to build out its services among different airlines.

Evercore analyst Jonathan Schildkraut raised his price target to $20 from $15, keeping an "overweight" rating, noting that recent progress on several fronts, including Gogo's recent win for Japan Airlines' 77 aircraft, Gogo's ground-to-orbit (GTO) announcement, which is capable of delivering more than 60Mbps to the aircraft, and the recently launched Text & Talk service for Boeing (BA) continue to demonstrate Gogo as a technology leader.

"Coming out of its IPO, many investors feared that satellite technology had leap-frogged GOGO's ATG capabilities - leaving the company at longer-term competitive disadvantage in NA and ROW," Schildkraut wrote in his note. "We believe GTO represents a leap-frogging of standard satellite service capabilities - providing an on-going leadership position in NA, while demonstrating its technology strength to the ROW market."

Schildkraut notes winning the Japan Airline contract highlights a big opportunity for Gogo, which has rest-of-the world (ROW) wins for approximately 250 aircraft so far. "The 77 aircraft Japan Airlines (JAL) win is important for two reasons: (1) it demonstrates that GOGO can win ROW fleets from non-U.S. carriers, and (2) it points to a still uptapped market opportunity in ROW."

Although most associate Gogo with in-flight connectivity (IFC), the company does have other services to help facilitate growth. The recent Text & Talk launch, and the in-flight entertainment (IFE) initiatives "highlight this potential."

Gogo is slated to report earnings on Nov. 11. Schildkraut is expecting the company to report a loss of 26 cents a share on revenue of $78.1 million, with the company burning $36.9 million in cash during the quarter. Analysts surveyed by Thomson Reuters expect the company to lose 31 cents per share on $76.8 million in revenue.

Shares of Gogo were falling 1.8% to $17.72 in mid Thursday trading.

--Written by Chris Ciaccia in New York

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