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fuboTV: Valuation Becoming Cheaper as the Company Grows
Stock Analysis & Ideas

fuboTV: Valuation Becoming Cheaper as the Company Grows

fuboTV (FUBO) is the company behind what is likely the world’s most viewer-friendly sports-oriented live streaming platform. It allows subscribers to stream multiple sporting events and related news channels simultaneously, offering a one-of-a-kind viewing experience. The company continues to grow its catalog and compound subscribers by the quarter.

Streaming giants like Netflix (NFLX), Amazon’s (AMZN) Prime Video, Disney+ (DIS), and AT&T’s (T) HBO lack extensive sports streaming content, with the exception of ESPN probably. fuboTV is tapping into a fragmented market that has failed to furnish consumers with an all-in-one sports streaming service experience.

I have been a FUBO bull for quite some time now due to the company’s rapidly growing financial and massive unlocked potential when it comes to the betting integrations the company is adding to its platform. FUBO’s latest quarterly results showed blockbuster numbers, supporting the stock’s bull case strongly.

However, Mr. Market was once again not that impressed apparently, with shares declining further. Surely, in the current market environment, good earnings may not be enough to lift stocks as the ongoing Ukraine-Russia conflict dictates the market’s direction. Simultaneously though, FUBO shares are becoming increasingly cheaper as a result.

With management’s guidance also coming in quite optimistic as well, I remain bullish on the stock.

Recent Results

FUBO is successfully executing its swift expansion plan, as it was once again demonstrated in its most recent exciting results.

Revenues grew 119% year-over-year to $230 million, with subscribers growing 106% year-over-year to 1.13 million. Additionally, the company was again able to extract more dollars from each subscriber, with ARPU growing 35.3% year-over-year to $72.7 per month.

It’s remarkable that fuboTV’s ARPU is several times higher than any other streaming service out there. This is due to fuboTV’s dynamic investments in its content catalog, smart bundling, and upselling strategy.

In my opinion, based on the platform’s development trajectory, the company should be able to further expand its ARPU moving forward. That’s especially the case considering that the platform’s betting initiatives are still in their infancy.

The company once again posted a relatively big loss which amounted to $110 million. However, as fuboTV scales, it should be able to break even in the coming years. Its losses for 2021 were 37% lower compared to 2020. The company’s adjusted contribution margin, in fact, was a positive 9.7% for the full year, an increase of 104 basis points year-over-year.

Finally, advertising revenues, which should be FUBO’s higher-margin growth catalyst, grew to $73.7 million, 153% higher compared to last year, also supporting the company’s margin-expansion case.

Wall Street’s Take

Turning to Wall Street, FuboTV has a Moderate Buy consensus rating, based on five Buys and four Holds assigned in the past three months. At $14.57, the average FUBO price target implies 92% upside potential.

Conclusion 

FuboTV is an exciting company that has been taking the sports streaming industry by storm. The company continues to grow at an extremely fast pace, and while it does lose money at the moment, I believe that its platform is set to generate robust shareholder value over the long run.

Based on management’s guidance for 2022, which forecasts revenues close to $1.085 billion, fuboTV should experience another year of explosive growth ahead. Based on this, the stock is also trading close to a forward P/S ratio of 1.1, which I find ridiculously low considering the company’s overall prospects.

FUBO’s biggest risk at the moment is the potential for dilution at the stock’s current, depressed levels. Excluding this, however, fuboTV’s investment case appears to be too good to overlook, in my view.

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