Even though the stock market has had a record run, there are still opportunities out there. One that’s not worth an opportunity? FuboTV (NYSE:FUBO). FUBO stock has been in the news lately, largely thanks to its volatile stock price.
Some investors can stomach these moves. If the position is small enough — like the size of a speculative holding — then the ups and downs are more tolerable. But for an actual full-sized position, FUBO stock is all over the map. It’s way too difficult to hold this name.
From its low on Oct. 13 to its high on Dec. 22, shares rose almost 600%. That was capped off by a five-day rally good for 135%.
While the upside is great, how many had the stomach to handle the pullback? Shares sank more than 62% during seven consecutive days of decline. I’m sorry friends, but that is just way too volatile for most of us and it’s not healthy price action. The recent lockup expiration won’t help matters, tripling the float.
There are too many good stocks and businesses to choose from where we don’t have to deal with that type of roller coaster ride.
Breaking Down FuboTV
So what exactly is FuboTV and where did the stock come from? Clearly there is a huge trend taking place in streaming digital content. We’ve seen enormous success across the board with a number of different platforms.
If anything, the novel coronavirus accelerated the cord-cutting trend — it certainly didn’t slow it down. That’s where FuboTV is looking to capitalize. According to the company, it’s “Live sports and TV without Cable. 100+ channels. Live and on demand. Cloud DVR included.”
The company has two main offerings, the Family plan at $64.99 a month and the Elite plan at $79.99 a month.
While the product offering is solid, that doesn’t mean it’s a slam dunk. For instance, Quibi debuted not long ago and failed when it came to the streaming world. Although FuboTV has a seemingly solid platform, can it outmuscle Hulu TV and YouTube TV?
With a market cap of roughly $2.4 billion, Fubo isn’t exactly flying under the radar, but it’s not massive either. It trades at about 10 times this year’s revenue estimates, which is rich but not egregious. At roughly five times forward revenue estimates though, bulls can make a case on that particular valuation.
However, that’s predicated on Fubo actually growing its revenue to that level, which would require a more than 83% jump to 2020’s sales total.
The projected sales growth is great, but there are a few red flags. First, Fubo loses plenty of money. Forecast to lose more than $5.30 per share this year, that’s a hefty hit to the bottom line. Further, Fubo has burned through $65 million in the last two quarters, which may seem inconsequential until realizing it only had ~$105 million in revenue during that span.
Bottom Line on FUBO Stock
Lightspeed Partners published a short report on Christmas Eve, kickstarting the massive decline in FUBO stock. Analyst Richard Greenfield said it “may be the most compelling short we have ever identified.”
According to the report, he sees the “secular decline of television viewing” as a headwind for internet television services and calls prospects of FUBO achieving success with sports betting “a pure fantasy.”
The analyst initially assigned an $8 price target to FUBO stock, but then cut that target to $6.50 on Jan. 19. They argued that Fubo would need to raise at least $1 billion for its sports betting “fantasy” they referred to in the first report.
Of course, now Greenlight’s David Einhorn has weighed in on the action too, coming at it from a bullish perspective.
At the end of the day, this stock is all over the map. FUBO stock trades more like a spec name than an investment and if that’s your thing, then that’s fine. But when it comes to seeking out investments, this one doesn’t fit the bill.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
