$GOGO DD: I researched 50 stocks using the SMELL system and decided to become a GOGO dancer
So, like the fucking title says, I researched 50 stocks over the past two days using the SMELL system invented by my new messiah /u/pennyether. If a stock has a 1bn+ market cap and 20%+ short interest, I’ve got an opinion on it now. I disregarded tickers that are already popular because I wanted something I had never heard of before. Enter $GOGO.
- Passes the SMELL test.
- 3 straight earnings beats.
- Undervalued based on ORTEX data.
- 31% short interest.
- IV is as low as it gets for this stock, 4th percentile.
- Will be back to at least $15 before EOY.
- Stocks only go up.
- This shit is literally already airborne. 🚀
What is GOGO?
So I had never heard of GOGO before doing my SMELLy research, probably because I’ve never flown. Basically, Gogo Inc. provides in-flight internet for business aircraft at a cost to the user. They’re present on airlines world-wide so you already know they’ve got opportunity in the expanding third world airline markets. Gogo used to service commercial aircraft as well, but they sold that portion of their business last year for $400m cash to survive the pandemic. It’s not that big of a big blow since they service 2.64x more business aircraft than they did commercial.
Dumping commercial aircraft doesn’t worry me. Business aircraft is their strength and I like to see a big dick CEO who is willing to take dramatic moves to stay agile and pivot towards a company’s strength during emergencies. In terms of numbers, Gogo is projected to do 318.5m in revenue this year and 352m in revenue next year. According to Robinhood they’ve beaten EPS projections for three straight quarters, recovering from COVID-19 much more strongly than expected. Per ORTEX says they’ve got an EV/EBITDA of 14.31, in line with the industry mean; and a positive EPS change of 16.21%. Plus an analyst price target of $13.25, so it’s still under fair valuation. In other words, this company is perfectly fundamentally sound, it that kind of thing matters to you.
So why is it shorted? Well, short interest has actually been falling from peak levels pretty consistently since March 2020 – despite a short lived surge where they got fucked in September 2020 and a recent uptick in shorting last week. Still, SI is 30%+ so let’s use the 🌈🐻 case to consider reasons not all shorts have exited their position.
Some airlines, like Delta, are transitioning to free internet to differentiate themselves from low cost airlines. But budget airlines have been rapidly expanding worldwide, and one way they remain budget is by letting services like Gogo handle the internet, so I actually see a huge opportunity for growth in that sense.
Some of the shorting could be fears that SpaceX’s Starlink might hurt their long term growth, but that’s a pretty fucking big maybe at the moment. Daddy Musk is a master of over promising so I think Gogo is safe in the air for a while. It could also be the fact that they currently have the investing equivalent of an ambulance chaser lawsuit filed against them, but they already defeated an almost identical lawsuit in 2019 so I’m not worried.
GOGO SMELL Test
If you’ve been keeping up with the DD that gets posted, you know that the SMELL test is the best new method for determining undervalued potential meme stocks. So how does GOGO do with the SMELL test?
- Short Interest: SI of float is currently estimated to be 31.37% by MarketWatch. If you’re familiar with the SMELL system, you’ll know that the purpose of SI isn’t to create a squeeze but to add a possible extra source of buying pressure. Based on ORTEX data, 1/4 of that short interest is new as of last week, when the price was around $14.50. If the price rises again, shorts have already shown that they’re willing to end their position. In fact, most 2020 shorts had already been unwinding their positions since at least January – until they came back last week.
- Market Cap: Market Cap is $1.3bn per Yahoo, so it’s legit.
- Extremely Memeable: The name is literally GOGO – the thing it’s going to do over the next 6 months. Of course it’s fucking memeable.
- Low Liquidity: Average volume is just 2m shares according to Yahoo, or 1.8% of market cap. Institutional ownership is 46.11%. According to Yahoo, investors like Vanguard, JP Morgan Chase, and Morgan Stanley have all recently added 20%+ compared to their previous investment. Per ORTEX, insiders have added 10m more shares total over the past twelve months.
- Low Risk: IV is 66%, so not great but not terrible. It was difficult finding any SMELL test candidate with IV under 60%. However, volatility is within the 4% percentile rank, meaning that IV was only lower 4% of the time in the last year. So this is as safe a time as ever to get in.
Previously, the stock exploded in Sept 2020, and climbed up to it’s 52 week high of $17.23 in January of this year. Apparently this stock already has a small following of short interest hunters and got caught up in the January madness although I don’t remember reading about it. After Jan 28, it fell down to $10 in April.
Since April, however, it was steadily rising until last week when approached $15 – at which point SI increased by over 50% (estimated 10.8m ➡️ 17m) and the price quickly tumbled back to $11.50.
Based on history, indicators, and fundamentals, I believe the stock will repeat it’s climb back to $15 as most shorters continue closing their positions and Gogo once again posts positive Q2 2020 earnings. 🚀
Positions and Price Targets:
50% Aug $15c
25% Jan 2022 $15c
25% Jan 2023 $15c
The $15 strikes have the most reliable open interest, and my preferable amount of risk. Earnings are expected Aug 9, and I expect that like most stocks, the price will rise in the couple of weeks beforehand in anticipation of another beat, then dip afterwards.
🐂🎯 – $17
🌈🐻🎯 – $12
This is all just my personal opinion. You are responsible for your own risk.
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June 16, 2021 at 09:24AM