We came across a bullish thesis on Boston Omaha Corporation (BOC) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on BOC. Boston Omaha Corporation (BOC)’s share was trading at $15.23 as of Nov 27th.
A busy urban street, its billboards showing advertisements for a variety of national and local brands.
Boston Omaha (BOC) reported its Q3 2024 earnings, showing steady growth across its business segments. Total revenues for the quarter reached $27.7 million, up from $24.5 million in Q3 2023. For the nine months ending September 30, 2024, the company generated $80.3 million in revenue, a 12% increase from $71.6 million during the same period last year. Revenue drivers included billboard rentals, which contributed $11.5 million in Q3, and broadband services, which generated $9.7 million. Additionally, premiums earned climbed to $5.4 million, reflecting a strong performance in the insurance segment, while investment income remained stable.
Despite the revenue growth, BOC reported a net loss from operations of $0.7 million for the quarter, a significant improvement over the $1.9 million loss in Q3 2023. The company’s net loss attributable to common stockholders remained steady at $1.6 million, with a basic and diluted net loss per share of $0.05. A key factor contributing to the loss was BOC’s investment in Sky Harbour, a company in which it holds a significant stake. BOC reported a non-cash loss of $9.4 million from its share of Sky Harbour’s operational losses. However, the increase in Sky Harbour’s stock value during the quarter resulted in a $7.8 million unrealized gain on warrants, partially offsetting the operational losses.
On the balance sheet, BOC’s total assets decreased to $711.9 million, down from $768.2 million at the end of 2023. Liabilities increased slightly to $158.5 million, while equity attributable to stockholders fell to $527.7 million from $538.2 million. The company’s book value per share also decreased to $16.82 from $17.19 at the end of 2023. These adjustments reflect the ongoing complexities in BOC’s operations, including depreciation in its billboard and broadband businesses and the accounting treatment of its investment in Sky Harbour. Nevertheless, the market value of BOC’s stake in Sky Harbour is significantly higher than the GAAP value, which could enhance the company’s overall equity.
Despite the net loss, BOC’s core businesses continue to show resilience. The company reported $12.1 million in cash inflows from operations for the first nine months of 2024, slightly down from the prior year. BOC also repurchased shares, buying back 97,262 shares of its Class A common stock for a total of $1.38 million during Q3 2024. As of September 30, 2024, BOC had 30.8 million shares of Class A common stock outstanding and 527,780 Class B shares.
The company’s investments, particularly its stake in Sky Harbour, remain a key asset, valued at $90.2 million on the balance sheet, with a current market value of approximately $154.7 million. This discrepancy highlights a potential undervaluation of BOC’s stock, as the company’s book value may be understated due to the accounting treatment of this investment. Adjusting for this market value difference, BOC’s book value per share increases to approximately $18.88, implying a 22.7% discount to its intrinsic value based on the price-to-book ratio. Given BOC’s current market price of $14.60, the stock appears to be undervalued, presenting an attractive upside potential of about 29% if the market recognizes its true worth.
Overall, while BOC’s financial results were affected by non-cash charges and accounting complexities, the company remains undervalued based on key financial metrics. The stock is trading below its book value, and adjusting for the market value of its Sky Harbour stake further enhances its appeal. As BOC’s core businesses continue to grow steadily, the stock offers a compelling investment opportunity with potential for significant upside as the market adjusts its perception of the company’s intrinsic value.
Boston Omaha Corporation (BOC) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held BOC at the end of the third quarter which was 9 in the previous quarter. While we acknowledge the risk and potential of BOC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BOC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.