Why Gogo Stock Skyrocketed 68.7% On Friday
Did Gogo stock really jump on a weak quarterly report? Here is why the rally may fade in a hurry.
On Friday, in-flight connectivity firm Gogo (GOGO +69.98%) experienced a significant 68.7% increase in stock value, defying a disappointing earnings report. The early trading session appeared justified, with the stock launching at $2.22, slightly below Thursday's close of $2.24. The market's lack of enthusiasm was evident, with revenue declining 5% year-over-year to $213.2 million, far below the expected $229.6 million.
Similarly, the net loss of $0.02 per share did not meet analysts' forecasts of about $0.08 in positive earnings per share.
However, the narrative shifted shortly after the market opened as investors focused on additional details from the earnings announcement. The refinancing and license renewal seemed to trigger an early-morning buying frenzy. Additionally, short-sellers found themselves caught in a squeeze, leading to a rapid increase in Gogo's stock price.
Despite this dramatic rise, the company's stock remains significantly below its 52-week high of $7.94, and the five-year chart poses concerns. While the 10-year license extension could prove transformative, Gogo faces numerous challenges. The core business is contracting rapidly as air-to-ground customers shift towards satellite-based services, some potentially moving away from Gogo's Galileo line.
Moreover, the short-squeeze portion of Friday's surge may not endure, as such spikes often wane without substantial backing from new information. The company's valuation is justified at current levels, trading at bargain-bin multiples. For more informed investment decisions, consider The Motley Fool's premium services.
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