Want to learn how to 5X, 10X, even 20X your stock gains?

Join investing legend Louis Navellier on March 3 when he unveils his most aggressive — and most exciting — way to play the boom in tech stocks.

Wed, March 3 at 4:00PM ET

Why FuboTV Shares May Be Worth a Big Bet

When FuboTV (NYSE:FUBO) surged to a high of $62.29 last month, the drop that followed erased that run-up. A pump from analysts and articles from widely-followed sites led to a buying frenzy in FUBO stock. But, when two short-sellers posted negative analyses, speculators dumped the stock.

Picture of large tv with fuboTV logo in center screen.
Source: Shutterstock

What is FuboTV worth and what upside does the company have in 2021?

Why FUBO Stock Sold Off

Kerrisdale Capital posted its short position on FuboTV shares on Dec. 30, sending the stock down 9% that day. The firm cited its 15 times multiple to 2021’s estimated sales. That would value each subscriber at $13,000. On that logic, each Tesla (NASDAQ:TSLA) automobile sold would have a $1 million valuation based on the stock price.

On Dec. 24, 2020, Lightshed Partners set an $8 price target on the stock (per Tipranks). The analyst expects a secular decline in television viewership would also hurt internet TV services.

The price target is silly: FuboTV’s market capitalization is unlikely to fall below the $500 million level. The firm has a good chance of growing revenue by 80%, to at least $400 million. Subscription growth is only accelerating. And since the markets are forward-looking, the stock’s rally is justified.

Sports Betting a Catalyst

After DraftKings (NASDAQ:DKNG) rose by four-fold from its 52-week lows, speculators bet that FuboTV’s sports betting strategy will pay off. On Jan. 12, the company said it would acquire Vigtory. The acquisition would mark an entry into the sports betting and interactive gaming market. The deal will include Vigtory’s sportsbook platform and digital gaming assets.

Founders Sam Rattner and Scott Butera would join FuboTV’s gaming division as president and chief operating officer, respectively. The company’s only medium-term risks are that these founders leave the company. Assuming that does not happen, investors may buy the stock at a discount. FuboTV trades at a market capitalization of around $2 billion, a fraction of the $20 billion value of DraftKings.

A 5-year discounted cash flow growth exit model would use the perpetuity growth formula (also known as Gordon growth) to calculate terminal value after five years. At a 4.5% growth rate, FuboTV shares are worth $65. This would imply an upside of more than 20%:

Metrics Range Conclusion
Discount Rate 8.5% – 7.5% 8.00%
Perpetuity Growth Rate 3.5% – 5.0% 4.50%
Fair Value $46.69 – $89.54 $64.89

Model courtesy of finbox

Furthermore, assume revenue growing by 80% in the fiscal year 2020. This must continue for the next four years:

(USD in millions) Input Projections
Fiscal Years Ending 19-Dec 20-Dec 21-Dec 22-Dec 23-Dec 24-Dec
Revenue 323 582 990 1,732 3,065 5,426
% Growth 42.90% 80.00% 70.00% 75.00% 77.00% 77.00%
EBITDA -122 -291 0 260 766 1,790
% of Revenue -37.90% -50.00% 0.00% 15.00% 25.00% 33.00%


Readers may adjust the above assumptions. In doing so, the fair value will change. By comparison, based on eight Wall Street analysts, the average price target for the stock is $38 (per Tipranks).


The recent volatility will attract bulls and bears alike. The short float of 41.77% is disconcerting. Markets benefit if the stock fall sharply, rewarding the bears.

Furthermore, the 10-year seasonal chart of FuboTV suggests that January is a very strong month for the stock. After that, the performance is random:

fuboTV stock shows strong seasonality in Jan.

FuboTV stock shows strong seasonality in Jan.

Chart courtesy of Stock Rover

Despite the two headwinds ahead – short-selling and seasonal favorability ending – investors should watch the trading action in FUBO shares. The broadcasting firm does not yet have the fundamentals to support its stock price. So, if momentum fades and bulls give up, the stock will head lower.

In the longer term, FuboTV’s continued subscriber growth and expansion in sports betting will attract investors. Bulls will have to tolerate the continued attack against the stock, accumulating on its weakness. If the company ends up growing as fast as Roku (NASDAQ:ROKU), faithful investors will get rewarded.

Your Takeaway

Readers should not only watch the stock but also give the product a try. If the free trial access on the phone and other devices does not impress, then investors should ignore this stock.

Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.

Article printed from InvestorPlace Media, https://investorplace.com/2021/01/fubo-stock-why-fubotv-shares-may-be-worth-a-big-bet/.

©2021 InvestorPlace Media, LLC