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Strength Seen in Gogo (GOGO): Can Its 7.3% Jump Turn into More Strength?

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Gogo (GOGO - Free Report) shares rallied 7.3% in the last trading session to close at $18.57. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 26.7% gain over the past four weeks.

GOGO’s stock rallied after it hiked its long-term financial targets. Per the revised guidance, revenues are expected to rise, witnessing a compounded annual growth rate of 15% between 2020 and 2025 compared with the previously mentioned 10%. The annual adjusted EBITDA margin is estimated to grow from 40% in 2021 to 45% in 2025 versus the earlier stated 35-40%.

Owing to the deployment of the Gogo 5G network in 2022, the free cash flow is anticipated to be $125 million and $200 million for 2023 and 2025, respectively, compared with the previous target of more than $100 million in 2023. Further, higher equipment sales on the back of solid demand for in-flight connectivity solutions coupled with booming private air travel are expected to drive its long-term margins. Based on these trends, we believe that the stock has more upside left.

This in-flight internet provider is expected to post quarterly loss of $0.05 per share in its upcoming report, which represents a year-over-year change of +54.6%. Revenues are expected to be $84.21 million, up 26.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Gogo, the consensus EPS estimate for the quarter has been revised 1.6% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on GOGO going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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