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William Blair maintained an Outperform rating on Gogo (NASDAQ:GOGO) in a note Wednesday but stated that monthly industry business jet flights are down for the fifth consecutive month.
This could cause the delivery ramp to pause in 2025, said William Blair analysts.
“November’s industry business jet flights were down 9% from last year, but still up 18% from 2019. The FAA released business jet flight volumes for November. The monthly comp has been negative for five months in a row. We expect business jet industry traffic to normalize to a low-single-digit range in the post-pandemic world, compared with flattish growth before the pandemic. Traffic growth is just one data point that reflects industry demand. Shortly after the data were released, Gogo shares traded up 7.3% on December 23 compared with the Nasdaq 100’s 0.22% increase,” explained the analysts.
They now estimate worldwide industry business jet deliveries of 720, 810, and 840 in 2022, 2023, and 2024, respectively, while the firm sees bookings beginning to moderate in 2023.
“We estimate that Gogo’s in-flight Wi-Fi AVANCE system will be activated on 700 new aircraft in 2023, compared with 577 aircraft activations for 2022. In the September quarter, Gogo shipped 25% more units of its system than its previous record high, which was for the June quarter,” the analysts added. “We estimate that roughly 40% of Gogo’s new planes will come from line fits and 60% will come from retrofitting existing aircraft. We estimate that the North American market is roughly 55% penetrated with high-speed connectivity.”
In William Blair’s view, the “recent dip in Gogo shares on recession fears is a buying opportunity.” Gogo shares are down 9% in the last month, but they have gained 6% in 2022.
“We believe the inflight connectivity market and broader business aviation market will prove to be highly resilient to a recession,” the analysts argue.
