FuboTV: Catalysts Should Deliver More Near-Term Upside

FuboTV (NYSE:FUBO) has been one of this year’s most successful new listings. The company started trading last October. Already, FUBO stock is up from $10 to $40. Since going public, the company has delivered huge earnings beats and has raised guidance. Not surprisingly, traders are gravitating to the stock.

The fuboTV mobile app icon is seen on an iPhone.
Source: Tada Images / Shutterstock.com

It’s clear that Fubo’s sports streaming service is quickly gaining traction with consumers. In January, FuboTV drastically raised its Q4 guidance, with forecasted revenues going from $82.5 million to $96 million. That’s a simply massive jump. Assuming FuboTV hits that target, it will be growing at an 80% rate year-over-year.

Among The Streaming Giants

Earlier this month, an exchange traded fund (ETF) manager launched the first ETF specifically dedicated to streaming. Roundhill Streaming Services & Technology ETF (NYSEARCA:SUBZ). Fubo is one of the top 10 holdings in the ETF, and currently makes up around 4% of the overall portfolio.

That puts Fubo in the same conversation as Roku (NASDAQ:ROKU), Netflix (NASDAQ:NFLX) and other such streaming titans. Both Roku and Netflix stocks make up 6% of this new streaming ETF. FUBO stock is right there as the ETF has 4% of its assets in FuboTV. While the SUBZ ETF hasn’t attracted much capital yet, it just launched a few weeks ago. Over time, if SUBZ takes off, it should provide a huge boost to Fubo and other smaller streaming companies that are given similar weighting to the industry leaders.

Massive Short Interest

One of the huge themes in the market this year has been short squeezes. We obviously had GameStop (NYSE:GME) stock go exponential last month. And traders have latched onto many other stocks with high short interest in hopes of catching the next big run. Clearly, short sellers are running scared right now, with major names such as Citron Research bowing out of the short selling game.

This brings us to FuboTV. Currently bears have sold 38% of FUBO stock’s float short. That’s astronomical. As per Finviz’s data, out of companies with a $2 billion market capitalization or larger, there are only 17 stocks with more than 30% of the float short as of the most recent reported data. FUBO stock is rare territory there, right up there with GameStop and 15 other highly-shorted names.

Why FuboTV Is A Battleground Stock

So why are bears so obsessed with FUBO stock? For one thing, the share price itself. FUBO stock is up from $10 to $40 in just a few months. At one point, it even hit $60. It’s been a monster run, and that sort of price action naturally attracts contrarians who want to fade the move.

More importantly, though, FuboTV is still in the early stages of getting its business rolling. The company already has its sports streaming service going, there’s no issues on that front. However, much of the valuation on FuboTV is due to its efforts to integrate a sports betting book into its service.

In theory, this would create a huge revenue stream. Look at how well sports betting stocks like DraftKings (NASDAQ:DKNG) and Penn National Gaming (NASDAQ:PENN) have performed over the past year. If FuboTV can tap into that revenue stream, the stock could still be really cheap here at a sub-$5 billion market cap. However, if FuboTV just earns the $65 per month or so per customer that it does now without any sports betting kicker, however, the stock would be far less attractive.

FUBO Stock Verdict

FuboTV will remain a fascinating trading stock going forward. The combination of huge short interest, ETF buying, and a small market cap means that FUBO stock could potentially make a huge move. I certainly don’t understand what short sellers are thinking here, this is a highly risky stock to bet against at this time.

That said, for longer-term investments, it’s still too early to tell on FuboTV. Just since the initial public offering (IPO) in October 2020, the stock is up 300%. That’s an awful big jump for a company that is still at the early stages of demonstrating its business model. FuboTV could end up being a huge winner, or it may get lost among the huge field of streaming rivals. And the sports betting angle remains unproven at this point.

Regardless, in the short-term, though, odds seemingly favor the bulls from a trading perspective. The gargantuan short interest, in particular, is just begging to attract buyers given traders’ current love for short squeeze candidates.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Article printed from InvestorPlace Media, https://investorplace.com/2021/02/fubo-stock-catalysts-should-deliver-more-near-term-upside/.

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