Growth is accelerating because the cell phone companies can't keep up with demand. Back in the old days most operators thought they were minting money by selling unlimited data access at $25 a month. Now that video downloads are becoming more widespread, that equation no longer solves. Limits are being applied, driving customers to free non-cell WIFI networks. Those networks aren't actually free, of course. Starbucks or whatever provider it is has to pay Boingo for the cost of delivering the goods, plus a profit. But the incremental cost is acceptable and the trend is likely to continue.
Bigger gains are possible if the mobile carriers sign explicit deals with Boingo. Up to this point it's all been pretty loosey goosey. But most cell phone companies are getting swamped with data traffic. Deep packet inspection companies like Allot Communications are enabling them to implement more profitable pricing models. Boingo is likely to benefit, as well, by keeping the networks going.
We estimate 2012 fully taxed income will reach $.35-$.40 a share. After that, it will be interesting to see. Further gains of some magnitude are virtually certain. But the company still has some cards to play before it hits the big time. Boingo is the industry leader, so the potential looks good. In 2-3 years income could attain $.75 a share. Applying a P/E multiple of 20x suggest a target price of $15 a share. Boingo is a small company with a key position in a gigantic industry. A substantially higher result is possible.
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