I’m a massive fan of sports-related stocks, so it’s hard to fathom that I’ve never before written about FuboTV (NYSE:FUBO) and FUBO stock.
Truth be told, I haven’t followed the sports streamer’s plans to get into sports betting too closely. When it comes to U.S. online sports betting, DraftKings (NASDAQ:DKNG) remains the gold standard, both as a business and an investment.
I recently recommended DKNG stock as one of seven stocks to buy to introduce kids to investing.
Sure, some parents might not like the idea of using a teaching moment to add another so-called vice to their child’s laundry list of potential landmines.
However, reality suggests that by the time kids reach the legal limit to place a bet online they’re already into all kinds of stuff, including investing in GameStop (NYSE:GME) and all the other Reddit and Robinhood stocks.
So, when you have a video streaming service that wants to extend its sports-focused brand to online gambling, I totally get it from a marketing perspective. That’s precisely what Score Media and Gaming (NASDAQ:SCR) is doing with its theScore betting app.
Several InvestorPlace contributors are high on FuboTV’s prospects in 2021 and beyond. That’s why Tezcan Gecgil recommended investors buy FUBO stock on the dips.
Down 35% in the past month through March 5, is my colleague right?
I believe the stock remains a risky proposition at around $33 today. Here’s why.
FUBO Stock Is Still Up on the Year
Despite losing significant ground over the past month, Fubo’s share price is still up almost 24% year-to-date and 252% over the past year. There’s no shame in trading in the high $20s.
Investors who bought shares of its October 2020 initial public offering (IPO) are up 200% in five months. On an annualized basis, that’s a 480% return. To want more would bring bad karma when it comes to future gains.
I suspect that many of the IPO investors took the opportunity to sell their shares in December when they hit a 52-week high of $62.29.
While FuboTV does have several high-powered entertainment companies in its list of insiders — Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA), and CBS (NYSE:CBS) — who have a vested interest in seeing FuboTV succeed, they’re also competitors. Much bigger ones, at that.
Disney’s Disney+ streaming services have gained 87 million subscribers in a little over a year. Fubo had less than 1% of that at the end of December.
So, despite the risks it faces on the streaming front (we’ll get into the online gambling situation shortly) FuboTV has managed to deliver 200% gains since its IPO.
It’s a big deal.
The Online Gambling Brand Extension
As I said earlier, the Canadian sports media platform theScore has also gotten into online sports betting. To facilitate this growth, it sold 6.9 million of its shares at $27 in early March. It sold almost 40% more shares than originally planned.
This is further proof that online sports betting is one of the major trends of the 2020s. Companies such as Score Media and FuboTV want a decent-sized slice of the financial pie. Not every companies’ shareholders are going to be happy with the outcome.
As we sit here today, theScore betting app is live in Colorado, New Jersey, Iowa, and Indiana. Not only is the media company looking to benefit in the U.S., in Canada, where theScore is based, the marketplace for online sports betting is also changing drastically.
In 12-24 months, the Canadian market won’t look anything like it does today; theScore will be a major beneficiary of those changes.
Former FanDuel executive and current sports-betting consultant David VanEgmond recently suggested that, despite its bravado, FuboTV has an uphill battle when it comes to its integrated betting platform.
“Their vision is not possible,” the Legal Sports Report quoted VanEgmond recently. “They’d need to have a different signup flow to account for KYC [Know Your Client] and AML [Anti-Money Laundering]. And they won’t want to do [it] for the FuboTV subscription product. So you’ll have to go through another signup for betting. That will be a huge friction point and barrier to conversion.”
And as the consultant points out, both DraftKings and FanDeul have acquired more bettors in recent months than FuboTV has active subscribers.
The Bottom Line on FUBO Stock
FuboTV’s March 2 shareholder letter stated that its adjusted EBITDA loss was $169 million in 2020 on $269 million in revenue. That’s 63 cents in losses for every dollar of revenue.
Score Media reported its Q1 2021 results in January. It lost 9.3 million Canadian dollars on 8.6 million Canadian dollars in media and gaming revenues. That’s losses of 1.08 Canadian dollars for every dollar of revenue.
Since Score Media sold its 6.9 million shares on March 1, its stock lost almost 21% of its value over the course of a week. Fubo stock is down about the same amount. Meanwhile, DKNG stock lost about 6% over the same period.
If you want to make a long-term bet on online sports betting, I would go with DraftKings. If you want to make a speculative bet on FuboTV, I would wait to buy when it’s back in the mid-to low-$20s, where it traded in early January.
Don’t cave to your inner fear of missing out.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.