A Dark Horse In The Streaming Wars

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For years Netflix dominated the streaming subscription business— enjoying a first-mover advantage over legacy media. 

But in 2022, the firm reported its first quarterly loss in subscribers in more than a decade. Competition has gotten stiffer as consumers have more streaming options from the likes of Amazon, Disney, Hulu, and Apple TV, to name a few. 

A new player in town is FuboTV (FUBO), who, in just a few short years, has amassed over 1 million subscribers. But does that make this rising star in streaming a good investment?

This seemingly unknown stock to many got caught in the recent meme stock resurgence, sending search results through the roof, putting it just below Apple in terms of total searches by financial pros for streaming stocks.

It beat out Disney, AT&T, Netflix, Roku, and Comcast.

Really??

fuboTV’s Business

fuboTV Inc. (FUBO) offers consumers a subscription live TV streaming service. The FUBO app is available on amazon fireTV, Android, Apple TV, Chromecast, Hisense smart TVs, iOS, LG TVs, Roku, Samsung Smart TVs, and Microsoft Xbox.

FUBO broadcasts over 50K live sporting events yearly from LaLiga, UEFA Champions League, Premier League, NFL, NBA, MLB, NHL, NASCAR, golf, tennis, boxing, MMA, and college sports. In addition, it carries many popular channels like ABC, NBC, Fox, and others. 

Most FUBO plans come with 1,000 hours of Cloud DVR, allowing consumers to record their shows or games at no extra charge. The company had 947K paid subscribers in North America as of Q2 2022, with 352K paid subscribers in the rest of the world as of Q2 2022.  

FUBO did $216 million in revenues during Q2 2022 from North America and $6 million in revenues during Q2 2022 from the rest of the world. 

It has more than 3x its subscriber growth in North America in two years, going from 281K to 947K. It has more than 70x its subscriber growth in the rest of the world, going from 5K in 2020 to 352K in 2022. 

Approximately 100+ million hours are streamed per month on the FUBO platform. While the company isn’t profitable, it believes it can get there by increasing its ad revenue and improving margins.

FUBU Financials

FUBO has experienced explosive growth over the last three years. 

The firm did $4.2 million in 2019, but by 2021, revenues exceeded $638 million. 

Today, its trailing twelve-month revenues sit at $851 million. 

At the moment, FUBO isn’t cash flow positive operating cash flow (ttm) sits at a negative $323 million. Plus, it carries a ton of debt. 

In its most recent quarter, it reported total cash of $327 million while having total debt of $443 million. Furthermore, it has a current ratio of 1.4x, meaning it has enough liquid assets to cover its short-term liabilities. 

Valuation

High P/E stocks have gotten punished in 2022, and unprofitable stocks, even worse. 

FUBO shares are down 77% year-to-date. 

On the bright side, FUBO has an attractive price-to-sales ratio of 0.67x.  It’s notably better than Netflix (NFLX) at 3.2x, DIS at 2.5x, and ROKU at 3x. However, FUBO has a lot of work to do, the firm has an EBITDA of -$407 million. Its diluted EPS is -3.08. 

Profitability

FUBO operates at a gross profit margin of -4.98%, which is clearly not good, especially when compared to rivals NFLX at 40%, ROKU at 48%, and DIS at 34.4%. 

The EBITDA margin of -47% is terrible. ROKU sits at 5.7%, NFLX at 20%, and DIS at 14.7%. But it gets worse. FUBO has a return on equity of -78%, while NFLX is 30.9%, DIS at 3.4%, and ROKU at -1.7%. 

Growth

If there’s one area of promise, it’s growth for FUBO. 

The firm grew its revenues by over 100% (YoY), beating out the likes of ROKU at 31%, NFLX at 12%, and DIS at 27.5%. Moreover, its forward revenue growth is 79%, indicating the firm has not maximized its growth potential yet. This far exceeds the forward revenue growth of ROKU  at 28%, NFLX at 11%, and DIS  at 12.9%. 

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Our Opinion  7/10

Given how bad this company looks, why would we give it a 7/10?

FUBO has gotten slaughtered in 2022, with shares down nearly 78%. 

However, the business is growing fast, and customers really like the service. 

More importantly, at these levels, we believe it will either be bought out by a larger rival, or the stock will bounce from here. 

The fundamentals are not there yet, but from a risk-to-reward standpoint, we feel like buying here makes a lot of sense.