5G And Galileo Investments Will Transform Global Aviation Connectivity

Key Takeaways

• Surging demand for aviation connectivity and advances in network technology position Gogo for long-term revenue growth and market differentiation.
  
• Recurring high-margin service revenues, improved cost efficiency, and strategic partnerships will drive profitability as upfront investments taper off.
  
• Growing competitive threats, sector-specific risks, high investment needs, limited market scope, and customer concentration collectively challenge Gogo's long-term revenue and profitability outlook.

Catalysts

Provides broadband connectivity services to the aviation industry in the United States and internationally.

• The accelerating global demand for always-on connectivity-in both business and government aviation-is leading to a significant increase in Gogo's addressable market, as evidenced by expanding OEM partnerships, surge in new aircraft deliveries, and strong international pipelines, which should drive sustained revenue growth over the medium and long term.
  
• Gogo is preparing for a substantial step-up in future margins and earnings as its heavy 2025 investment cycle in 5G and Galileo rolls off, with high-margin recurring service revenues expected to outpace any decline in legacy business and cost synergies from the recent Satcom Direct merger boosting profitability beginning in 2026.
  
• The transition to a multi-orbit, multi-band network architecture (including 5G air-to-ground and low earth orbit/satellite hybrid solutions) uniquely positions Gogo to deliver higher bandwidth, global coverage, and differentiated, premium-priced services, enabling ARPU expansion and supporting long-term EBITDA margin improvement.
  
• The very low current penetration of broadband connectivity in the global business jet fleet (less than 25%) creates a long runway for growth, and regulatory/market pressures for digital cockpit and real-time safety communications further ensure durability and consistency in demand, providing stability and upside to future revenues.
  
• Gogo's growing use of modular, upgrade-friendly hardware, robust software analytics, and deepening integration with key OEM partners not only increases its market moat but also reduces customer acquisition and upgrade costs, improving net margins over time as more business shifts to high-value, analytics-driven and service-based revenue streams.

Gogo Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Gogo's revenue will grow by 17.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.0% today to 15.1% in 3 years time.
• Analysts expect earnings to reach $168.3 million (and earnings per share of $0.89) by about August 2028, up from $7.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.8x on those 2028 earnings, down from 232.2x today. This future PE is lower than the current PE for the US Wireless Telecom industry at 22.9x.
• Analysts expect the number of shares outstanding to grow by 5.3% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Gogo Future Earnings Per Share Growth

Risks

• Intensifying competition from satellite connectivity providers (such as Starlink and Viasat) presents a long-term threat, with management acknowledging future ARPU (Average Revenue Per User) contraction in GEO broadband as alternative solutions become more cost-competitive, potentially compressing revenue and margins over time.
  
• Dependence on continued strength in business aviation and military/government sectors exposes Gogo to secular risks from potential declines in flight activity (such as those tied to increased adoption of virtual work, ESG-driven reductions in air travel, or economic downturns), which would negatively impact equipment sales and recurring service revenue.
  
• Heavy investment requirements for technology upgrades (5G, Galileo, HDX, FDX, and network harmonization) create pressure on free cash flow and net margin expansion, and while management anticipates these will roll off, ongoing R&D could limit future profit growth if new competitive or regulatory requirements arise.
  
• Gogo's limited presence in commercial aviation restricts its total addressable market, meaning long-term growth is capped relative to larger, more diversified players, constraining future revenue and earnings growth potential.
  
• Reliance on a small group of OEM partners and business jet manufacturers for much of its installed base brings customer concentration risk; deterioration of key relationships or competitive displacement could have outsized negative effects on revenue and cash flow.

Valuation

• The analysts have a consensus price target of $15.75 for Gogo based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.5, and the most bearish reporting a price target of just $14.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $168.3 million, and it would be trading on a PE ratio of 17.8x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of $12.62, the analyst price target of $15.75 is 19.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.