We came across a bullish thesis on Boston Omaha Corporation (NYSE:BOC) on Substack by LittleBarnSparrow. In this article, we will summarize the bulls’ thesis on BOC. Boston Omaha Corporation (NYSE:BOC)’s share was trading at $13.70 as of Jan 7th.
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Boston Omaha Corporation (NYSE:BOC) continues to evolve steadily, with its three key operating segments — Link Media, General Indemnity Group (GIG), and Boston Omaha Broadband (BOB) — contributing to a compelling investment narrative. Despite some short-term challenges and uneven quarterly results, the company’s diversified approach positions it well for long-term growth, underpinned by a disciplined capital allocation strategy and a focus on high-return opportunities.
Link Media reported a year-over-year revenue growth of 5.6%, mirroring the previous quarter’s growth rate, though quarter-over-quarter growth was minimal. Margins declined slightly due to higher expenses, including increased ground rent spending. These cost increases appear non-structural, stemming from routine lease contract renewals, and management continues efforts to optimize ground rent spending. Link Media remains a reliable cash flow generator for the company, with $4.5 million in EBITDA this quarter. However, investment in this segment has been modest, reflecting management’s prioritization of Boston Omaha’s broadband expansion. The potential for high-return investments, such as converting static billboards to digital faces, remains attractive but deferred as management allocates capital to more urgent opportunities. Overall, Link Media fulfills its role as a stable and cash-flow-positive segment, though its growth in Q3 was less dynamic than earlier quarters.
GIG, Boston Omaha’s insurance subsidiary, continues to shine as a rapidly maturing business. Revenue grew 41% year-over-year, with operating income surging by 150%, demonstrating the subsidiary’s increasing contribution to the company’s overall performance. Despite a slightly higher loss ratio than the previous quarter, GIG maintains strong profitability metrics, with a loss ratio of 17%. Adjusted EBITDA reached $0.9 million, highlighting its steady growth trajectory. The subsidiary’s float is also expanding, offering greater potential for investment gains. GIG has historically been overshadowed by Boston Omaha’s other segments, but its operational improvements, low loss and expense ratios, and management’s focus on growth suggest it could become a significant driver of long-term value. Management’s strategic emphasis on scaling GIG, combined with its already strong results, positions it as an emerging growth engine within the broader portfolio.
Boston Omaha Broadband (BOB) remains the company’s most critical segment, with management’s focus and investment priorities squarely aligned with its expansion. While Q3 revenues decreased slightly quarter-over-quarter, this decline is part of a deliberate strategy to phase out lower-quality fixed wireless subscribers in favor of higher-quality fiber subscribers. This transition, while temporarily impacting revenue, is a conscious move to enhance long-term cash flow durability and scalability. Fiber subscriber numbers grew, as did fiber passings, though both metrics came in below expectations, reflecting a slower quarter in terms of capital expenditure. CapEx of just under $6 million this quarter was lower than the $7.8 million spent in Q1 and Q2, suggesting a temporary slowdown rather than a strategic shift. The company has secured a $20 million credit facility, with $3.5 million already drawn, signaling a clear intent to accelerate fiber investments. This moderate leverage aligns with management’s long-term strategy to scale the fiber business, leveraging increasing cash flow from the other subsidiaries and proceeds from asset sales like those from BOAM.
The fiber business requires significant upfront investment in passings, with revenues from subscribers materializing gradually. While this creates short-term “ugliness” in financial results, the long-term potential is substantial. Management has consistently reiterated this point, emphasizing the need for patience as the fiber business scales. Despite Q3’s mixed results, the broader outlook remains positive, driven by improving cash flow from all three segments, operational efficiencies, and the ongoing transition to a more profitable subscriber base.
Boston Omaha’s near-term financials also reflect the impact of transitional expenses, including those related to the departure of co-CEO Alex Rozek and the gradual closure of BOAM. These short-term disruptions should normalize over the coming quarters, allowing cash flow to stabilize and investment in high-growth areas like BOB to ramp up significantly. BOB’s adjusted EBITDA of $1.3 million this quarter, if annualized, suggests the segment is already generating meaningful cash flow, with ample room for growth as fiber investments scale.
In summary, Boston Omaha’s diversified business model and disciplined capital allocation create a compelling investment case. Link Media provides stable cash flow, GIG is emerging as a high-growth contributor, and BOB represents a transformative long-term opportunity despite short-term volatility. Management’s strategic focus on high-return investments, combined with improving operational efficiencies across all segments, positions Boston Omaha for significant value creation in the years ahead.
Boston Omaha Corporation (NYSE:BOC) is not on our list of the 30 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.