19 Jan Is fuboTV a Good Investment Choice?
fuboTV, Inc. (NYSE: FUBO) is a live streaming platform that offers sports, news and entertainment channels for over 945 thousand paid subscribers. The Company has announced better-than-expected preliminary Q4 results with the revenue nearly $10 million higher than the initial forecast, besides adding 40,000 more subscribers. We take a look at the Company below:
Strengths
The Company reported preliminary Q4,2021 results, according to which revenue is expected to be in the range of $215 million and $220 million, as against a guidance of $205 million to $210 million, similarly the revenue guidance for the entire year has been raised to $622 million-$627 million, denoting a 138%-140% year-over-year (YOY) increase in sales.
In addition, the subscriber churn is likely to reduce by 2 % YoY, marking the thirteenth consecutive quarter of churn improvements. Most importantly, the number of paid subscribers is expected to exceed 1.1 million, an increase of 100% YoY, while the advertising revenue is likely to grow by 90% YoY, to reach $25 million. The subscriber acquisition cost is expected to be at the low end of its target range of 1 to 1.5 times monthly ARPU.
The Stock has been assigned a price target of $60.00, with a “Buy” rating by analyst Laura Martin from Needham & Company, while analyst Jason Helfstein from Oppenheimer has set a price target of $42.00, with an “Outperform” rating. In December 2021, Anna Lizzul, an analyst from JPMorgan initiated coverage with a $28.00 price target and an “Overweight” rating.
The Company is small when compared to more formidable Virtual Multichannel Video Programming Distributor (vMVPD) Competitors such as Youtube, Hulu etc, however fuboTV has been doing consistently well on key performance metrics such as reduced churn, subscriber growth, ARPU and robust engagement. The Company has been raising guidance and has delivered better than expected results.
Image Source: Company
fuboTV expects the revenue to grow by 135% over 2020, which means that it has managed to catapult from $4.3 million in revenue as of December 2020 to $614.5 million. The Company is growing much faster than its competitors. In Q3,2021 the ARPU of the Company stood at $74.54, higher than 10% compared to the previous year, while its expenses fell by 28 % to $259.9 million.
The Company offers many sports channels, including BeIN Sports, Universo and TUDN, besides offering some regional sports networks. fuboTV has scored streaming rights for Premier League in the Canadian market for three seasons beginning in 2022-2023, in addition to owing exclusive rights to Italian Serie A and Coppa Italia. The Company has also signed a multi-year carriage agreement with Hemisphere Media Group, Inc. to make the content of all five Hemisphere cable networks—WAPA América, Cinelatino, Pasiones, CentroAméricaTV and Televisión Dominicana, which target the U.S. Hispanic/Latino market, available to the subscribers of fuboTV’s Latino channel plan in the U.S. and Puerto Rico in Q1 of 2022.
The Most promising offering though is Fubo Sportsbook, which was launched in November 2021, by Fubo gaming. This marks its foray into the mobile sports betting market and is an industry-first integration of a sports wagering platform with a live TV streaming experience. The Company has got market access agreements in the states of Iowa, Arizona, Pennsylvania, Indiana and New Jersey.
fuboTV, Inc. (NYSE: FUBO)
Market Cap: $1.97B; Current Share Price: 12.34 USD
Data by YCharts
Weakness
The Company’s stock is down by over 50% over the past year, while continuing to improve its performance with respect to both top line and bottom-line results. The Company had posted a greater-than-expected loss of $105.9 million, or 74 cents per share and reported a loss of $271 million in Q3,2021. Although the losses are shrinking YoY, the Company may not be profitable for the next few years at least.
Though the Company offers some regional sports channels, it does not have a carriage deal with Bally Sports (Sinclair Broadcasts), which is the largest owner of regional sports channels that offers coverage for MLB, NBA, NHL, MLS, NCAAF among others.
fuboTV also underwent leadership changes with Sam Rattner, the chief operating officer of Fubo Gaming and the founder of Vigtory, a sportsbook that was to be the Company’s stepping stone into the sports betting arena, leaving the Company. The reason for leaving was stated to be for working with newer companies that are yet to distinguish themselves on the market.
Opportunity
According to a report by Grand View Research Inc, the global Video Streaming market will reach an estimated USD 124.57 Billion by 2025, growing at a CAGR of 19.6 percent. The growth is due to the availability of high-speed internet such as 3G, 4G and LTE, which is causing an increase in the demand for online and on-demand content. The emergence of online streaming platforms such as Amazon, Netflix and Hulu are challenging the content dished out by conventional television channels. In fact a report by ResearchandMarkets predicts that the online Music Streaming industry alone will be worth over US$56.7 Billion, growing at an impressive CAGR of 33.6 percent.
As per an estimate over 100 million internet users watch videos online and 92 percent of these users share video content with others. Live Video is also one of the fastest growing segments in terms of ad revenue, with an impressive 113 percent growth in ad revenues, outperforming the growth of other forms of online video. Another interesting statistic is that 45 percent of live video users are willing to pay for live content. Live streaming solutions have wide applicability, transcending its current use for entertainment streaming. The technology can be applied to various segments of the economy such as news, business meetings, training, education, advertising campaigns ecommerce and online shopping as well.
The technology provides an opportunity to connect to target audiences and opens up new revenue streams. The industry is still at a nascent stage, being limited to passive broadcasts over TV’s, which will gradually evolve into more personalised live streaming experiences as the technology evolves and adaptation improves.
According to the American Gaming Association (AGA), sports gambling was legal and active in 21 states, plus the District of Columbia as of May 2021. 6 states have legalized betting but do not have live services yet. The U.S Sports betting market is expected to generate $2.1 billion in revenues in 2021, and reach $10.1 billion by 2028 according to a study by research and brokerage firm Gabelli Securities and the US Census Bureau.
Threats
The Company faces stiff competition from industry behemoth’s such as Youtube TV, Pluto TV and Hulu. fuboTV may fail to attract new subscribers or may perform poorly on parameters such as Churn, ARPU or advertising revenue.
fuboTV’s foray into the sports betting market can be a risky undertaking as the industry is still in a nascent stage and will likely witness cutthroat competition for customer acquisition from the likes of satellite TV and vMVPD provider Dish Network that tied up with DraftKings, a gambling app, to initiate bets while watching live games that correspond to the bets, including provisions for a fantasy league.
In the Sports Betting arena, the Company will need to spend a considerable amount of money to acquire new customers and compete with competitors such as Penn National and Caesars Entertainment.
Furthermore, the Company’s regional sports segment could face competition from Sinclair, which has launched the Bally Bet app through a multi-year partnership with Elite Casino Resorts, which streams regional sports. Sinclair aims to
“work towards solidifying Bally’s as a leading retail sportsbook brand with the third greatest reach in terms of U.S. legalized market access.”
Key Takeaways
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://investorplace.com/2022/01/fubotv-and-fubo-stock-investment-thesis-seems-to-have-broken-down/
https://www.emarketer.com/content/sports-gambling-opportunity-marketers
https://www.gamblingnews.com/news/sam-rattner-chief-operating-officer-of-fubo-gaming-resigns/
https://advanced-television.com/2022/01/14/fubotv-scores-premier-league-rights-in-canada/
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