Global Eagle Entertainment Stock Soars on Solid Revenue Growth, Stock Up 38%.

Global Eagle Entertainment

Global Eagle Entertainment Inc. (NASDAQ:ENT) stock soared as much as 38% in Wednesday’s trade, supported by stronger than expected growth in financial numbers. In the third quarter, the company generated revenue growth of 23% to $460 million, thanks to the Emerging Markets Communications acquisition.

Moreover, the growth in Connectivity segment due to new vessel, aircraft and site additions, also added to the overall revenue growth.

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Its go-to-market strategy seems to be working with numerous new business wins in its connectivity and media & content segments. Furthermore, the company has also been working on the strategy of enhancing service levels through efficient network management.

The company’s CEO said: 

“The Company continues to strengthen its go-to-market strategy by developing solutions that enhance the customer’s entertainment experience, such as the Company’s new Ocean Prime TV product for maritime markets.  Ocean Prime TV is an extension of the Company’s successful aviation IPTV and cruise-television products, which the Company has customized for broader maritime segments.”

Although the company’s revenue base improved sharply in the third quarter, higher operating costs are leading it to post negative earnings.  In the third quarter, Global Eagle operating earnings were standing around negative $160 million. The company posted negative earnings per share of $2.57 per share, higher from the loss of $0.27 per share in the same period last year.

Paul Rainey, CFO of Global Eagle, indicated that the company is focusing on lowering the cost structure along with investing in high margin products.

Rainey said, “We began strengthening our finance functions and shared services, which we expect will lead to lower one-time cash expenses and reduce overall operating expenses as we move into 2018.”

The company needs to do a lot of work on their margins and operating costs to generate positive earnings in the following quarters. Negative earnings usually have a significant impact on the company’s cash generation potential. Thus, the company needs to depend on external sources for investments in growth opportunities. Its higher debt to equity ratio of 1.6 compared to the industry average of 1 indicates that trend.

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About the author: Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.