Shares of Gogo Inc (NASDAQ: GOGO), the leading provider of in-flight internet services, plummeted by 5.02% on Monday, following the release of its third-quarter 2024 earnings report. The decline reflects investor concerns over the company's slower-than-anticipated growth and the potential impact of its recently announced acquisition of Satcom Direct.
For the quarter, Gogo reported a 3% year-over-year increase in total revenue to $100.5 million, driven by growth in service revenue and a rise in advanced equipment shipments. However, this growth fell short of analysts' expectations, contributing to the stock's decline. Additionally, the company's net income dropped by 49% to $10.6 million, and profit margins contracted from 21% in Q3 2023 to 11% in Q3 2024, primarily due to higher expenses.
Despite the challenges, Gogo's earnings per share of $0.083 surpassed analyst estimates by 57%. The company also provided guidance for 2024, projecting revenue between $400 million and $410 million, adjusted EBITDA of $120 million to $130 million, and free cash flow of $55 million to $65 million. However, investors remained cautious, as Gogo announced the withdrawal of its multiyear long-term financial targets due to the pending acquisition of Satcom Direct, creating uncertainty about future financial performance.
Analysts expressed mixed reactions to Gogo's results and the Satcom Direct acquisition. While the acquisition is expected to enhance Gogo's capabilities and market reach in the LEO (Low Earth Orbit) connectivity market, concerns arise over the potential impact on cash flows and debt levels. The revised long-term revenue growth guidance from 15-17% to 10% for the combined company also raised eyebrows, as Gogo aims to cautiously navigate the integration process.
Looking ahead, Gogo remains optimistic about the growth prospects of its Gogo Galileo and 5G products, as well as the opportunities presented by the Satcom Direct acquisition. The company expects to double its initial projection of 200 Gogo Galileo shipments in 2025, leveraging Satcom's distribution channels and customer base. However, investors will closely monitor the execution of the acquisition and the company's ability to deliver on its growth targets amidst increased competition and potential pricing pressures in the aviation connectivity market.
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