Gogo Inc (GOGO): This Near Monopoly Can Still Double The Size Of Its Business

I am comfortable projecting 20% growth in the top line for this company for the next three years. That puts revenue in the $490 million range by year-end 2016. Why so confident? The income statement shows us two good reasons:

2. Pricing is on the rise. Gogo Inc (NASDAQ:GOGO) has managed to increase its per-session fee by 55.6% without losing customers. In fact…

3. Volume is on the rise. In 2010, 4.7% of the people who took flights on Gogo Inc (NASDAQ:GOGO)-equipped aircraft shelled out for Internet access (37 million passengers so far, according to the company’s most recent count.) Now, the “take rate” is up to 6.2%.

Room for Growth
I’m from the “trust, but verify” school. So I made a list of Gogo Inc (NASDAQ:GOGO)’s announced airline clients and researched their respective aircraft fleets. I came up with a total of just over 1,800 planes. Gogo says 1,878 at year-end 2013 with a few more as of the end of April, according to the prospectus. These numbers are close enough for me to have confidence: Airlines have several thousand planes on order, and new jets go into service fairly regularly.

In other words, Gogo Inc (NASDAQ:GOGO) has the chance, just in North America, to add another couple thousand planes to its market.

That’s more than twice what it has now, and that is just in North America.

Priced to Buy?
Gogo Inc (NASDAQ:GOGO) is here. It’s already a true game-changer. Founded in 1991 to bring phone service to the skies, it’s now providing data to millions of fliers. I think its network will continue to expand, both in capacity and speed (quality) and in fleet count (quantity). This is a very appealing position to be in, especially when turning a profit appears to be so close.

However, this IPO was poorly priced. Its underwriters shot for the high end, and they missed. Shares have fallen as low as the $10 range since they debuted at $16. Today, they are in the $10 to $11 range.

Gogo Inc (NASDAQ:GOGO) still has a lot of hurdles and may take a few years to reach its full potential, but I wouldn’t be surprised to see it become one of my best-performing picks of 2013.

P.S. I have a confession to make. While I like Gogo’s potential, it still didn’t make the list for my Top Predictions for 2014. Gogo may be changing connectivity at 30,000 feet, but my predictions for 2014 are focused on the next big thing — the kinds of future technologies, trends and life-changing events that have the potential change the way we live forever. And, simply put, those with the foresight to get in early stand to make a fortune. To find out more about my predictions, go here.