Is FuboTV Stock A Buy?

Fubotv Inc (NYSE:FUBO) may not be the first name you think of in streaming television. Netflix (NFLX), Amazon (AMZN), YouTube, and Disney (DIS) are the names that come to mind for most people.

But FuboTV gained investors interest from companies like Disney, AMC Networks, Sky, and Scripps. It also has league support for live sports broadcasts from most major American leagues and international soccer. That sparks investor to ask is FuboTV stock a Buy?

Aside from its sports network, the company doesn’t have a studio creating content and instead acts as a broadcaster of other studio’s content. It’s more like Pluto TV, a rival service which also carries the company’s sports channel.

The company is one of many finding its lane in the crowded streaming video ecosystem. Once you see the monthly bill for Netflix (NFLX), Hulu, YouTube, HBO Max, and everything else stack up, you might start to miss the quaint monopoly cable providers once had.

Why are fans of sports leagues like the National Football League and Major League Baseball choose Fubo over bundling cable from Comcast or AT&T into their data plans?

FuboTV Has A Huge Market Opportunity

FuboTV launched in January 2015 as a soccer streaming service and expanded into other sports and channel lineups to target cord cutters. TechCrunch estimates 77.6 million U.S. households pay for cable, satellite, or telecom TV packages, while 31.2 million are streaming only customers.

This means Fubo navigates a fine line between offering traditional services at a modern price and bridges a gap between cable subscribers and cord cutters.

As a digital platform, it has a lane for content providers to bypass cable companies and offer their content to bigger audiences. It’s a cable-free cable company, like Sling TV, DirecTV Now, YouTube TV and Hulu’s Live TV plan (when also bundled with Disney’s ESPN plus).

It offers cloud-based DVR, pausing and unpausing live streams, and more premium cable services.

With competitors like Viacom, Disney, and Discovery all onboard, FuboTV is arguably among the best online cable providers. It’s slowly expanding into news, blogs, and more. In fact, it technically produces more original content than Hulu, although it still lags behind Netflix.

And the company experienced exponential growth over the past year.

Is FuboTV Stock A Buy?

FuboTV started 2021 with a market capitalization of around $2 billion. Shares in the company crashed to a 52-week low of $5.00 in the lead-up to the 2020 election, before skyrocketing to over $60 per share through the holiday season.

The company benefited from the rise in online sports betting, adding 72 percent more paid subscribers to end the year at 545,000. This gave it fourth quarter revenue of nearly $100 million and proved its value among fans and investors.

Pricing finally settled around $30-$30 per share when the market settled, and that’s a seemingly fair price until the company proves it can scale to generate more revenue while holding its existing users in a post-pandemic recovery market.

FuboTV generated $61.2 million in the third quarter of 2020 alone. The problem is it did so while operating at a loss, reporting $65.5 million for that same quarter. Like Uber, FuboTV has a problem of profitability, despite industry tailwinds working in its favor.

That brings us to the risks of investing in FuboTV.

Risks Of Buying FuboTV Stock

The story of FuboTV’s risks starts with the Juicero of streaming services – Quibi. Founder Jeffrey Katzenberg was once the chairman of Disney and co-founder/CEO of Dreamworks Animation. The 2018 announcement of Quibi (created in partnership with former eBay CEO Meg Whitman) seemed like a home run.

It ended more like a sack and fumble, as the streaming company returned a paltry $350 million off its $1.65 billion raised from investors. These investors included Disney, NBCUniversal, Sony, Viacom, and WarnerMedia.

As sad as its story is, Quibi’s 2 million subscribers still beat FuboTV’s user base in its single failed year.

And the competition for Fubo is only heating up. Disney (DIS), Apple (AAPL), Netflix (NFLX), and Amazon (AMZN) are all pushing to release more original content. Comcast’s Peacock service is ramping up too, and it seems like every studio has its own streaming service at this point.

FuboTV Success Depends On Marketing 

With so many of the same companies involved, it’s hard to say exactly who is competing with whom. But FuboTV as an app is in a very competitive landscape. Each of the streaming services mentioned above can overtake it, and they’re all going to need to spend heavily on marketing to get any real penetration.

The service’s standout is live TV streaming, but it still competes with Fox Soccer Match Pass, ESPN+, and individual league apps for that content. Over time, licensing fees and other issues will show for FuboTV just like they did for Netflix (NFLX) and others.

Fubo’s relatively low production costs mean if it stays small and grows content, it can have a big impact on the streaming landscape. 

Is FuboTV Stock A Buy? The Bottom Line

FuboTV is a streaming cable alternative service that has partnerships with all of Hollywood’s usual suspects. Its biggest draw is live sports, and seamlessly integrating that with existing broadcast and cable network content makes it the future of the traditional cable package.

Except it’s not clear if that’s what consumers really want, and there’s a plethora of streaming options in the marketplace.

The 2020s could be a decade of consolidating streaming services, and it’s unclear how much Fubo can lean on its partners. Like the legacy cable operators, it may one day find itself dealing with customer blackouts due to stalled customer negotiations.

In the meantime, it’s benefitting from newer contracts with both content providers and sports leagues to broadcast with fewer interruptions in local coverage than traditional cable providers.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.