While it seems like the future of entertainment lies in the hands of streaming platforms, companies like FUBO (NYSE:FUBO) are proof that cable isn’t completely dead. Known for their exorbitant prices, many have made the switch from cable to on-demand platforms like Netflix (NASDAQ:NFLX) in an effort to cut their monthly bills.
However, providing the right service at the right price can still sustain demand for a premium cable service. FUBO’s 455,000 paying customers can attest to that. Although, the company has its naysayers FUBO stock has a lot going for it this year.
FUBO Stock Is A Cable TV Success Story
Despite operating in an industry that many see as being in its last years, FUBO has figured out a way to work the system and become a modern-day cable TV success story. Shares of the stock saw a 227% in the last 12 months. While the price has come down considerably since then to $32, there are many reasons to still have faith in this stock.
When it comes to pricing, streaming platforms traditionally hold the winning ticket in this category. At $64.99, FUBO TV isn’t as cheap as its OTT peers but is a bargain compared to other cable services. Cable packages often come with add-on fees which can make the price of the subscription much higher. Factoring these numbers in, FUBO is a great deal for customers who prefer to have a variety of channels to choose from. With that said, the cable company is not yet profitable but has managed to lower its losses over the years.
Secondly, FUBO TV is trying to leverage its position in the sports community. Live sporting events are known to bring in viewers in large numbers, especially for cable companies. As part of its package, FUBO offers more than 36 sports channels in 4K high definition. With sporting events canceled through the first-half of 2020, FUBO’s sports venture wasn’t as lucrative as expected. But things changed in the latter half of the year that enabled the company to amass a viewer base of 455,000 customers.
Fubo TV’s rally this year may not be as strong as it was in 2020 but with significant upside, I think the stock still has some fuel left in the tank.
FUBO’s Sports Betting Venture
In the past year, a wave of sports-betting legalization has swept across the U.S. This surge has led many companies to get into the lucrative world of sports-betting including FUBO. On Jan. 12, the company announced that it will acquire the company, Vigtory. This partnership will allow FUBO to expand its reach in the sports gambling sector.
The Vigtory deal is FUBO’s second partnership in the industry. The first being the purchase of Balto Sports, a tech-based sports-betting company. While the returns from these acquisitions are yet to be seen, they will certainly pay off in the long-term. Experts predict that the sports-betting market will be valued at $144.4 billion by 2024. This gives FUBO a long runway for growth, if it is able to successfully leverage its position in the market.
Furthermore, a sportsbook (sports gambling service) will complement FUBO TV’s expansive list of sports channels. Given that the customer base for sports already exists, I don’t think the cable company should have any problem making its mark in the high-growth industry of sports betting.
The Bottom Line
FUBO stock had a solid run in 2020 and while the value is still higher than its IPO price of $10, many have cast their doubts on the durability of the stock. Rich Greenfield of Lightshed Partners gave the stock a ‘Sell’ rating and a price target of $8. He argues that the allure of bundled packages for sports no longer exists. Greenfield believes the customer base for bundled plans will continue to shrink just as it has in the past.
Given the historical performance of bundled services, there is good reason to question the long-term prospects of FUBO. Nevertheless, I think the company can use its position in the sports industry to expand its offering. The growth potential in the sports-betting market coupled with a reasonably priced service will lift FUBO stock in the long-haul.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.