While valuation concerns over fuboTV, Inc. (NYSE:FUBO) are justified, there might be more wiggle room than you think for FUBO Stock.

fuboTV is a public virtual multichannel video programming distributor platform (MVPD), sort of like Sling (private) and Hulu, owned by Disney (NYSE:DIS). Although those numbers are more difficult to break out for comparison we can compare FUBO to Netflix (NASDAQ:NFLX) using an analysis of their subscriber base.

This might be able to tell us if FUBO stock is too high, adjusting for its very fast growth rate.

For example, fuboTVps revenue growth is growing by more than 80% year-over-year. It is known as a sports-first virtual MVPD with an emphasis on live streaming and sports.

In fact, the company just announced on Jan. 5 its revenue would rise between 77% and 84% during Q4. Moreover, its membership count would be up 72% year-over-year.

But since going public on Oct. 1, FUBO stock has been on a tear. In fact, from $10.26 to a peak of $62.00 in late Dec., the stock was up over 500%. But since then, it has fallen to $27.31 as of Jan. 8.

Market Capitalization and FUBO Stock

Nevertheless, depending on how many shares are included in the market capitalization, FUBO has a market value of $3.571 billion.

As I said, this depends on the share count. fuboTV has a unique capitalization. For example, reading through page 5 of its latest prospectus, it appears that there are 130.805 million shares outstanding.

But that assumes that all its Series AA Preferred Stock converts into common stock. I suspect this will happen over time, but there are good reasons why this should happen.

For example, the preferred shareholders only get 0.8 votes per preferred. But each of the preferred converts into two common stock shares. Therefore, if they convert their preferred into common they get a higher vote count of 2 votes rather than 0.8 votes.

In addition, their common stock is liquid and has a value, whereas the preferred stocks do not trade. Moreover, there are a number of warrants and options that are clearly “in-the-money.” T

I expect sometime over the next year or so 31.53 million more shares will become common stock shares. That will raise the share count to 162.335 million shares.

This effectively raises the market cap to $4.433 billion (i.e., 130.805 plus 31.53 million shares, or a total of 162.335 million shares times $27.31 per share).

Valuing FUBO Stock

The company estimates that its paid Q$ subscribers will grow by 72% to 545,000. If we divide its market cap by the paid subscribers, we can see how much the market values each paid subscriber.

For example, using the $3.571 billion market cap (i.e., with 130.805 million shares outstanding), the price per subscriber is $6,552 ($3,571 million divided by 0.545 million).

Moreover, using the higher $4.433 billion market cap (i.e., after all the in-the-money warrants and options convert), the price per subscriber is $8,134.

Now compare this with Netflix. Their latest Q3 shareholder letter forecasts for Q4 201.5 million “Global streaming paid memberships.” Moreover, the NFLX stock has a market cap of $224.83 billion. Netflix’s price per paid membership is just $1,119 (i.e., $224,830 million divided by 201.5 million members).

So, here we have a huge discrepancy. FUBO stock is valued 5.9 times greater (i.e., FUBO $6,552/subscribers vs. NFLX $1,119/membership) than NFLX stock. Or it could be as much as 7.27 times than NFLX stock at the higher market cap.

Adjusting for Growth Differentials

Perhaps we can account for the fact that fuboTV is growing its subscriber base much faster than Netflix. For example, Netflix’s Q3 membership count was up 23.3%, but fuboTV’s base was up 58%. And as I mentioned earlier, it appears the Q4 base will be up 72%.

Therefore over five years, Netflix’s base will be 2.85 times its base today, assuming 23.3% compound growth. But, using say a 65% growth rate over five years, fubuTV’s base will be 12.23 times today.

Therefore, Netflix’s $224.83 billion market value divided by 574.3 million members results in a forward price per member of $391.49. But fuboTV will have 6.665 million subscribers, so its $3.571 billion market value results in a value of $535.78 per member.

Now the value gap has narrowed considerably due to the huge growth differentials. Using the higher market cap results in a slightly higher value gap. But in general, it now looks that FUBO stock is only overvalued by about 36%.

However, I suspect that this value gap actually narrows to breakeven over about a 10-year outlook. Therefore, the growth difference makes up for the valuation per membership or subscription gap – depending on the future year time frame.

What to Do With FUBO Stock

I used a 65% growth rate for the next five years for FUBO stock. But, as pointed out, the company projects that its Q4 revenue might grow over 84%.

Moreover, the company is taking on new lines of revenue that Netflix does not have. This includes advertising (already on its books) and also sports betting. This gives it a more robust valuation spectrum than Netflix.

Therefore, taking all this into consideration, FUBO stock might not be seen by the market as too highly valued. However, we need to see some consistent growth patterns from the company and more clear information about its capital base.

Once these are clear, I suspect the market might revalue FUBO stock as a younger, more rounded version of Netflix.

On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Mark Hake runs the Total Yield Value Guide which you can review here.