Among the more perplexing opportunities in the market today is FuboTV (NYSE:FUBO). On one hand, FUBO stock is levered to an incredibly relevant industry: sports and entertainment streaming provider. Essentially, the underlying company allows people to cut the cord, a burgeoning phenomenon during this novel coronavirus lockdown.
On the other hand, streaming is a highly crowded, highly competitive market.
What’s more, FuboTV’s third quarter earnings report adds to the perplexity of FUBO stock. Back in November, the company disclosed that it reached over 455,000 subscribers, a 58% year-over-year increase. As well, it generated $61.2 million in revenue, up 47% from the year-ago quarter. Finally, the platform saw increased watch time up to 121 hours per month in the quarter, a 20% improvement from the previous year.
As management articulated, Q3 “was the strongest quarter in FuboTV’s history.” Further, a “heavy sports calendar, busy news cycle and Hollywood’s fall entertainment season delivered many viewing options for consumers.” On the surface, the percentage gains in core fundamental metrics is encouraging for FUBO stock.
But from another angle, there’s much to be desired. Don’t take this as casting aspersions toward FUBO stock but its underlying subscription numbers are nowhere where they need to theoretically be competitive against heavyweights like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)-owned YouTube, Netflix (NASDAQ:NFLX), Hulu and Amazon (NASDAQ:AMZN) Prime Video, among others.
Granted, it’s not fair to make a direct comparison to some of these companies. As you know, FuboTV focuses primarily on sports, while offering other news and entertainment packages. But the broader point is that there’s nothing truly distinct about the service, which is problematic longer term for FUBO stock.
Also, another point to make is that FuboTV it seeks to become holistically sports centric. In addition to broadcasting live matchups, the company will broaden its sports-betting footprint through key acquisitions like Vigtory.
Again, this is encouraging for FUBO bulls, but it also raises problematic concerns.
Is FUBO Stock About to Get Covid-Slapped?
I like a good debate. Although I’ve disagreed with him on many points, I still highly regard the late Christopher Hitchens. True, he was the bane of many religiously devout individuals. But he also (ironically enough) served a higher purpose: if you truly believe in what you do, you should not fear putting that belief to independent scrutiny.
Those who failed to defend their thesis were often on the end of a brutal takedown known colloquially as the “Hitch-slap.” Admittedly not as entertaining, FUBO stock risks receiving what I would term a “Covid-slap.” Let me explain.
FuboTV specializes in streaming sports content. I mean, even the name of the company looks like the international spelling of football (or soccer for us Americans). Therefore, you’d expect that the overwhelming number of people who subscribe to Fubo watches sports.
That could be the case today. However, back in 2019, entertainment was the biggest draw, according to information provided by Cord Cutter News. Not only that, the only segment that didn’t increase in demand in 2019 was sports, which saw a 13% decline from June to October of that year.
In contrast, entertainment content viewing increased 2.4% in the same period, while news – the least popular of the three segments – increased 20%.
Admittedly, a lot has changed so sports could be the overwhelming favorite right now. But it’s interesting to note what management stated back in its Q3 conference call. To repeat, a “busy news cycle” driven mostly by the coronavirus was one of the main catalysts for Fubo’s record-breaking quarter.
Well, that cycle is probably going to fade in intensity now that “Sleepy” Joe Biden – former President Donald Trump’s favorite playground insult – is the current president. The drama that is the Trump administration just doesn’t exist anymore, at least not to that intensity.
Further, the marquee sports league, the NFL, will soon conclude its season. Thus, FuboTV will lose two catalysts – one of them on a perhaps permanent basis. That’s not great news for FUBO stock in the long run.
Not Completely Unreasonable as a Gamble
It’s appropriate that FuboTV is getting deeply involved with sports betting. At the end of the day, FUBO stock is a gamble.
Ordinarily, that might dissuade even risk-tolerant contrarians. However, this is the new normal. Gambling is the “in” thing right now. We’re seeing crazy moves just because enough people believe in the narrative, even if the premise is flawed.
Thus, despite everything that I said above, FUBO stock is “appropriate” for a short-term, high-risk, high-reward trade. But over the next several months, especially as the quarterly earnings come up, I’d be hesitant to wager heavily unless the fundamentals justify it.
Look, if we happen to see a huge decline in sports and news viewership, that will leave Fubo competing on a secondary priority, entertainment. But there’s definitely a ship-ton of competition in that arena, making the long-haul bullish narrative a bit more treacherous than you might think.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.