Streaming play FuboTV (NYSE:FUBO) had everything working in its favor. Analysts loved it. Shares were soaring. The bull case seemed clearer than ever. Then, a short-seller report sent FUBO stock plunging, and that plunge continues today. So what do you need to know right now?
Importantly, many investors may still be unfamiliar with the streaming TV company. However, leading up until Christmas, FUBO stock was garnering tons of attention. That is because experts began to see FuboTV as the best up-and-coming option in the streaming space — a better-priced competitor to YouTube TV and Sling TV. As InvestorPlace analyst Luke Lango highlighted, FuboTV offers 113 channels for $65. Similar packages from competitors cost more for less channels.
And Lango was not the only analyst pounding the table for FUBO stock. Earlier in December, we reported that shares were surging thanks to a recommendation from The Motley Fool. According to the Rule Breakers service, FuboTV is quickly attracting audience. Perhaps more importantly, the report also highlights that FuboTV is unique in putting sports content first.
So with everything working in its favor, what happened to FUBO stock? And why are shares continuing their plunge this week?
Well, at the end of December, Kerrisdale Capital took on FuboTV. The short-seller report outlined quite a few grievances against the streaming company. Kerrisdale finds fault with its valuation, alleges it will never generate meaningful profits from its subscription revenue and challenges its business projections. Namely, Kerrisdale pushes back on claims that FuboTV will be the next Netflix (NASDAQ:NFLX) or the next DraftKings (NASDAQ:DKNG). Citing executives at a variety of media and sports betting firms, Kerrisdale cautions investors that downside catalysts are on the way.
Unsurprisingly, that report hit FUBO stock hard. In the last five trading days, shares are down 25%.
The Plunge in FUBO Stock
So what should investors make of the ongoing plunge in FUBO stock?
Well, starting with the basics of the Kerrisdale Capital report, it is true that FuboTV massively shot up following its initial public offering. Debuting in October, the broad popularity of the IPO market likely contributed to the success of FUBO stock. Add in the streaming TV appeal, and it is clear to see why so many investors flocked to the little-known company. Because the novel coronavirus has boosted the bull case for streaming TV, there was a rush to get in on the ground floor of the next big thing.
In any situation like the one in FuboTV, there is reason for caution, and for investors to do their own research. The streaming catalyst is certainly present and powerful — especially as 2021 starts with elevated Covid-19 case levels. But just because streaming media is a hot industry does not mean FUBO stock is guaranteed success.
Keep an eye on FuboTV, and wait closely for an update on its business operations. For now, InvestorPlace analyst Louis Navellier maintains a B rating on shares in his Portfolio Grader.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.
