The market ended the day in a ho-hum mood after the largest year-over-year inflation reading in over 40 years, but shares of Gogo ( GOGO 10.09% ) were, well… going. The stock ended the day just over 10% higher, putting it up 112% over the last one-year stretch. Talk about beating inflation.
According to the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) reading for March, inflation was up 8.5% year over year — the fastest rate of increase in over 40 years. Surging gas prices accounted for nearly half of this, with the broader energy component of the index up 32% from a year ago.
For consumers, that’s terrible news. But perhaps peak inflation is now in the books. Notably, national gas prices are down some 5% since their high in March, and the national average price of gas could continue falling if oil and fossil fuels also fall. After briefly spiking above $120 per barrel in March, crude oil is currently back down to about $100.
Of course, the situation remains uncertain given turmoil caused by Russia’s invasion of Ukraine. But trends are at least pointing to a temporary stabilization in energy prices. What does this have to do with Gogo? Fuel is a primary input cost in air travel. If fuel prices fall, air travel demand should continue to rebound this year. Gogo provides broadband connectivity for the aviation industry, so more air traffic and more passengers is good for business.
Gogo reported a 24% increase in 2021 revenue to $336 million, and adjusted EBITDA of $151 million. The commercial launch of its 5G network is expected in the second half of this year, which management says could boost revenue for years to come. Gogo thinks it can achieve 15% per year average growth from 2021 through 2026, and achieve adjusted EBITDA profit margins of nearly 50% by 2026.
Granted, those are lofty aspirations for a communications network operator, and those goals will rely on a steady and gradual increase in airline traffic and adoption of its network. If it can pull it off, Gogo is perhaps worthy of being a best 5G stock to invest in. But only time will tell. Up until the pandemic, Gogo’s stock had been steadily heading in the wrong direction since its IPO. Shares are now up 44% since their public debut in 2013.
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