UPDATE: Morgan Stanley Upgrades Gogo (GOGO) to Equalweight

Morgan Stanley analyst Simon Flannery upgraded Gogo (NASDAQ: GOGO) from Underweight to Equalweight with a price target of $15.00 (from $14.00).

The analyst comments "We're upgrading to Equal-weight and increasing our price target to $15 as valuation looks more reasonable and solid trends are likely to continue for the near/medium-term: We're expecting another constructive earnings print from Gogo as the company continues to benefit from tailwinds driving increased IFC penetration from historically low levels. Our downgrade to Underweight in October 2021 was driven by our view that GOGO shares were not pricing in rising industry competition risk. While we continue to have some concerns regarding rising competitive intensity, Gogo now trades at a more reasonable valuation (~12.5x vs ~16.5x fwd EBITDA) and has so far proven more resilient than expected with strong trends in 2022. Additionally, the company appears to have solid visibility with a backlog that "stretches well into 2023" and management calling for 15% AVANCE shipment growth next year, while we also already have 2023 FCF guidance. Along with our upgrade, we revise our estimates higher as we remove some competitive headwinds that we had previously assumed for unit growth and marketing expense; our 2023 revenue estimate is up 5% with EBITDA up 6% (Model Changes & Financial Model). We increase our price target to $15 from $14 as we roll forward to 2024E EBITDA on a discounted basis; we assume a 12.5x multiple vs 13.5x previously given peer valuation compression (particularly Cable). This multiple also represents a ~15% discount to our Base Case multiple for IRDM, which is our preferred niche connectivity play given accelerating growth and capital returns along with an emerging satellite smartphone connectivity Bull Case."

For an analyst ratings summary and ratings history on Gogo click here. For more ratings news on Gogo click here.

Shares of Gogo closed at $14.22 yesterday.

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