Is fuboTV Stock Overvalued?

As more and more people join the already countless number of individuals who have cut cable in recent years in favor of much more affordable and convenient streaming services, it only makes sense to see those streaming services become more valuable as a result. This is especially true of those streamers that can provide users with the same kinds of live TV channels as cable but at a fraction of the cost.

There are all sorts of different services providing live TV packages or add-ons these days, but one of the most notable examples is fuboTV.

Founded in 2015, fuboTV has become a highly sought after service for its focus on live sports channels such as ABC, CBS, FOX, ESPN, and any other sort of channel that can provide viewers access to NFL, NBA, MLB, and NHL games at a much cheaper price than cable.

All of this attention on fuboTV — especially in light of all the playoff games as of late, not to mention the highly anticipated return the Olympics — has resulted in some interesting stock market behavior for fuboTV shares. Has this resulted in fuboTV stock being overvalued? Let’s look at the numbers.

Why fuboTV Stock Went Up

Over the past twelve months or so, fuboTV share price has been on a pretty steady rise with a handful of peaks in December of 2020, January of 2021, and June of 2021.

While there several reasons as to why these rises in share price might have happened, the most recent instance of fuboTV stock going up seems to be credited to two main things: the meme stock market, and fuboTV’s newly announced improvements set to be made to the streamer’s interface.

It appears that, at least in June of this year, fuboTV stock got caught up in the rush of meme stocks like AMC and GameStop (GME). As they rose, so did fuboTV: a whole 28% over the course of a month, in fact.

These meme stock traders search for shares sold short, and while fuboTV seems to have had much more of these back in January than in June, there was still plenty of activity for fuboTV stock to be found.

Retail investors and traders could have also taken a liking to what fuboTV plans to do to its interface, implementing things like live stats and quizzes (the former making sports betting much easier, which could bring more subscribers to fuboTV and drive its price per share even higher).

fuboTV Financials Are… “Irregular”

Originating as a service solely for streaming in 2015, then switching to a wide range of sports in 2017, then switching again to a virtual multichannel video programming distributor with the addition of a whole slew of non-sports channels in 2019, fuboTV has gone through several big change-ups in its relatively short history thus far. This has resulted in some pretty irregular financials for the company.

According to reports, in 2017, the company had a total revenue of just $41,000. Three years later, in 2020, the company’s annual revenue had risen to over $330 million. That’s an astronomical increase in just three years, with seemingly nowhere to go but up: In Q1 of 2021 alone, fuboTV has reported a total revenue of $110 million. If the company can continue to bring in these kinds of numbers throughout the rest of 2021’s remaining quarters, then it will be in great shape.

As far as debt goes, fuboTV undoubtedly has some — around $330 million, to be exact. This is equivalent to the company’s entire 2020 revenue.

While it’s certainly a high number, it’s not exactly something for fuboTV investors to be concerned about. Given the massive increase in revenue the company has experienced these past few years, it’s quite manageable for fuboTV to handle it. The more people flock to fuboTV, the better shape its financials will be in. For now, though, the company isn’t exactly profitable.

Is fuboTV Valuation Too High?

Taking these profits and losses into consideration, fuboTV’s valuation does seem to be high at this point in time. Its current market cap is $3.7 billion, with an enterprise value of a slightly lower $3.6 billion, but in recent months, fuboTV stock seems to be falling just as often as it is rising.

It has more than doubled its price per share over the past twelve months, but take into consideration: In July of 2020, its price per share was only about $10. Analysts appear to be in agreement: unless something changes soon, fuboTV’s valuation is too high.

But a discounted cash flow analysis suggests that there is plenty of upside yet in FUBO shares. Applying a standard DCF projection places a price per share fair value of $39.50 on FUBO, suggesting lots of potential to move higher still.

Will fuboTV Stock Fall?

If the company’s history over the past six years is anything to go by, it seems likely that fuboTV stock will fall. Price volatility has been a staple of its share price movements since its IPO.

It was trading for over $250 a share back in November and December of 2016, and ever since then, fuboTV has never even managed to come close to this impressive level. (The closest was in January of 2018, and even then, fuboTV stock was only about $66 a share.)

Given the strong fundamentals underlying the company and the tectonic shift from cable to streaming, FUBO has the wind at its back, however, and share price dips are likely good buying opportunities.

Is fuboTV Overvalued? The Bottom Line

Taking into account the reason why fuboTV stock is going up, how uncertain its financials have been over the past several years, and its current market cap, FUBO has plenty of skeptics.

Has price run too far in the short-term? Perhaps. But keeping an eye on the powerful forces of change that led the company to skyrocket revenues should not be ignored as they are unlikely to change any time soon.

It’s going to take some time for its valuation to settle as bulls and bears fight it out, and while some experts predict to see fuboTV stock go up to $60 a share over the next twelve months, it’s more likely that fuboTV stock will be no higher than $40 a year from now based on a discounted cash flow forecast analysis. 

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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.