While for most, 2020 has been a long hard slog, it has also provided investors with some unseemly gains. The year has been marked by strong returns in several segments, from coronavirus stocks to work-from-home stocks to EV stocks and connected TV stocks.
fuboTV (FUBO) belongs in the latter group, although it adds a smattering of other on-point trends into the mix. Since going public in early October, the sports focused streaming platform has made quite a splash. Shares have soared by more than 470% in the interim, and questions are already being asked whether such a rise is justified.
Needham analyst Laura Martin seems to think so. Martin’s bullish thesis is based on a few factors: a) FUBO is taking share from competitors; b) its Hisense partnership lowers SAC (subscriber acquisition cost); c) upside from sports betting; d) OTT multiple expansion; e) short covering; and, f) CTV upside.
Over the past 24 months, according to Antenna market research, FUBO’s market share has increased 2.5x to 5%, while at the same time, AT&T’s TV now and Sling TV’s cumulative market share has declined by 23 percentage points.
Although during the same period, YouTubeTV and Hulu Live TV have both accumulated market share faster than FUBO, Martin estimates they are both losing substantially more money “despite the fact they each sell at a 8% higher price (at $65/month) than FUBO (at $60/ month).”
How come, then? Martin explains: “An average of 75% of FUBO’s subs watch sports each month, vs 1/2 that level for YouTube and Hulu. Since sports linear channels charge the highest fees each month for every subscriber (whether or not they view the channel that month), FUBO’s average “wasted” (ie, zero ROI) content cost is about 1/2 the level of other vMVPDs (virtual multichannel video programming distributor), we estimate.”
Martin also notes that, on average, FUBO is “valued at a 62% discount” to other OTT streaming companies under Needham’s coverage.
And while FUBO stands to gain from the ad industry’s pivot to CTV, it is also making inroads in another industry expected to pick up stream over the next few years. Specifically, FUBO acquired Balto Sports, a company which develops tools for fantasy sports players. Martin sees the new addition as FUBO’s first move into online sports betting.
To this end, the 5-star analyst has doubled her price target on FUBO from $30 to $60. However, with shares already up 108% over the past 5 trading sessions, the stock is expected to stay range-bound for now. (To watch Martin’s track record, click here)
Martin’s colleagues are all on the same page. FUBO has a Strong Buy consensus rating, based on Buys only – 7, as it happens. However, all appear to believe shares have soared too high, too fast. Going by the $37.71 average price target, the stock will be changing hands at a 35% discount over the next 12 months. (See FUBO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
