Stock Analysis & Ideas

fuboTV: What Does the Subcription Price Hike Mean for the Stock?

If you want a prime example of a high-growth stock that has taken an almighty beating since the turn of the year, then FuboTV (FUBO) is a more than apt case.

Interestingly, the sports-focused streamer’s shares sit ~60% into the red on a year-to-date basis, while the top-line and the sub count are growing at a rapid pace. But that has meant little for investors as the losses have kept piling up. The company is banking on ad revenue and sports betting to address the ongoing losses but it has now taken another step to help mitigate the bleeding.

FUBO is now raising the price of its $65/month basic vMVPD (virtual multichannel video programming distributors) package by $5/month to $70/month. The last time the company hiked prices was back in July 2020, when the price rose by $5/month to $65/month.

Basically, the company has merged the basic plan with the Pro offering, which still stands at $70/month. By mid-May, FUBO expects to have 100% of its “basic” subs paying $70/month. There will be no change to the Elite tier offering which will stay at $80/month, while both tiers will include the $33/quarter Latino plan.

So, what’s the difference between the two? The Pro has the same sports and news and entertainment channels as the old basic tier, but DVR storage is upgraded to 1,000 hours and it includes unlimited screens. The new Magnolia Network is also included (before this was only available with the Elite package).

“These added features are designed to lower churn,” says Needham’s Laura Martin, who notes that following A/B testing to decide what approach to take regarding the price hikes, FUBO found that “because its more expensive plans include more channels and hours of DVR storage as well as more simultaneous streams of viewing, customers were more engaged and churn was lower.” And this “maximizes the LTV (lifetime value per customer) per customer.”

Nevertheless, Martin expects the price hike to result in “higher churn” in Q2, although the positive effect will be “higher margins and more FCF.”

All in all, the 5-star analyst maintained her Buy rating on FUBO shares along with a $15 price target. This target puts the upside potential at a whopping 145%. (To watch Martin’s track record, click here)

Martin’s objective is just below the Street’s $15.25 average target which is set to generate returns of ~150% in the year ahead. Those are some big gains, which are projected despite the mixed ratings; the analyst consensus views this stock a Moderate Buy, based on 6 Buys vs. 5 Holds. (See FUBO stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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