Streaming video got a massive boost from the pandemic. Shut in because of lockdowns, people were starved for entertainment and naturally subscribed to several services. Plus, with movie theaters closed, many blockbuster films skipped the big screen and went direct to streaming. So, what should you make of FuboTV (NYSE:FUBO)? Even after huge subscriber gains — a 58% year-over-year (YOY) increase in the third quarter — live sports-focused FuboTV is a relative bit player. FUBO stock has posted big gains since last fall, but it is incredibly volatile.
What do I mean by volatile?
In just the past three months, FUBO is up 266%. And that’s not the whole story. Within that narrow timeframe, FUBO stock spiked well over 100% in the course of a week, then dropped by 61% only weeks later. And those are just the biggest moves.
A Tumultuous Year For FUBO Stock
We all know the story of how 2020 kicked off. But the year also started on an interesting note for FuboTV, when the company announced its merger with FaceBank Group on Apr. 2.
After an initial spike, FUBO stock remained flat through the summer and early fall. But then things began to get interesting again. In October, shares rose, then accelerated in November after the company reported big subscriber gains in Q3. Third-quarter earnings were complicated by the completion of the FaceBank deal, but key information had investors sitting up and taking note. Paid subscribers to FuboTV hit a record 455,000 during the quarter with subscription revenue up 64% YOY. Ad revenue was up even more — a 153% YOY increase.
That said, the company’s subscribers are a mere fraction of the number other streaming services added. However, FUBO subscriptions cost far more — instead of $5 or $10, the FuboTV family plans start at $65 per month. That subscription cost, plus growing ad revenue, lets the company put up some big ARPU (Average Revenue per User) numbers. For Q3, that was $67.70 — very impressive compared to leading streaming video services.
Those Q3 earnings kicked off a rapid spike in the stock. As the company gained visibility, investors piled on. That peaked on Dec. 22 with a $62 close — a 478% gain since the start of October. However, a scathing report from short-seller Kerrisdale Capital quickly brought the party to an end and shares plunged 61% to the $24 level in a matter of days.
What to Expect From Q4
After bottoming out early in January, shares of FUBO stock have been trending upward in recent weeks. A big catalyst for that ongoing recovery? On Jan. 5, the company released solid preliminary Q4 numbers.
For Q4, FuboTV says both revenue and subscriber growth will exceed previous guidance. At this point, it’s projecting revenue of $94 million to $98 million, a YOY increase of 77% to 84%, respectively. On top of that, paid subscribers are expected to top 545,000. That would represent a 72% YOY increase and is significantly higher than the previous guidance of 500,000 to 510,000 subscribers.
Finally, adding to the positive sentiment for FUBO, the company also announced its acquisition of Vigtory, a sports betting company.
Bottom Line
There is a lot to wade through when making a decision about investing in FUBO stock. The company is blowing past its guidance and piling on subscribers. It has big appeal for sports fans, but also offers a large selection of broadcast TV channels that make it a real alternative to cable. However, that appeal is offset by a lofty monthly subscription fee that prices FuboTV out of reach for many potential customers. Add sports betting acquisitions and short-sellers into the mix and you have the perfect recipe for volatility.
At this point, this name holds a “B” rating in Portfolio Grader. But what do the investment analysts think of the stock? The Wall Street Journal is currently tracking eight analysts with FUBO coverage. They have it rated as a unanimous buy. However, their average 12-month price target of $45.50 has no upside. It shows that the stock is already priced to reflect anticipated 2021 growth.
I think that this company is onto something and a return to some normalcy in the sporting world next year will help its value proposition. At the same time, though, that sports focus and high price seems likely to keep it as a niche offering. I would consider adding FUBO stock to my portfolio as a company with long-term growth potential, but I wouldn’t be in a rush to do so. There’s simply too much volatility at this stage.
On the date of publication, neither Louis Navellier 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.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system —with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
