Current Hot Stock BARCO delivers the goods, but price falls on fear of stalling growth.

Barco is our current Hot Stock (We’ll get to the letter “C” soon enough). It is also the number one Belgian “Magic Stock”, Joell Greenblatt-wize.

Numbers for 2019 were pretty good.

Screen Shot 2020-03-06 at 07.41.56.png

Revenue grew almost 10%, above 1 billion euro. Clickshare grew in double digits, helping EBIDTA Margins grew to a 14% – that is a 2% jump. EBITDA jumped 27%. Order book is good and shows another 10% growth next year. Dividend will be 2,65.

It is planning to do a 1:7 split.

All good news, yeah?

Still, Barco shared in the global sell off:

Screen Shot 2020-03-06 at 07.13.26.png

As I said before: the reason I can’t bring myself to buy Barco is because I think it is vulnerable to calamaties like new competition or innovation.

It turns out people are thinking Barco is vulnerable to epidemics as well. Not so much that Corona is hurting Barco (there are some distribution problems), as it is hurting Barco’s clients.

42% of Barco’s profit comes from entertainment, including laser cinema. Most of the growth comes from China.

With Corona shutting down cinema’s in China – local theaters are not in the mood for investing.

Also they warned that their new “big margin, low expense” product Clickshare Conference will need some additional time to find traction.

So, growth might stall a little. Revenue might even fall somewhat. It is obvious why.

Barco is diversified in 3 areas. Maybe the “healthcare” unit will find additional markets, once certain countries realize they have to invest in their healthcare system?

My philosophy is: a bad year, doesn’t make a bad company.

The fundamentals of the growth cylinders in Barco have not changed.

So if you like Barco before, you will like it even better at these prices? Even with one bad year under it’s belt.






Eén reactie

  1. It’s not only Barco’s cinema business that will suffer. Their Venues & Hospitality business is dependent on large events which are currently also being cancelled. However, my best guess at this moment is that this business will see a V-shaped recovery once the corona fears disappear. On the other hand, it might be that a poor year for the cinema operators could put a dent in their initial ambition to invest in Barco’s new cinema projectors in the coming years. You may have noticed that many of Barco’s largest clients are heavily indebted. It will be interesting to see how well they will survive a poor 2020. These cinema operators will definitely curb their CapEx for years to come in order to service their debt loads. While it appears like the shares have sold of massively, do note that the valuation of Barco prior to this sell-off was out of this world (for what is predominantly a hardware equipment business with products in various stages of the S-curve).


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