FuboTV (NASDAQ:FUBO), created last year by the merger of a “skinny cable” company and a European tech outfit, is still waiting for its big deal. As a result, investors may be wondering how they should feel about FUBO stock.
On May 4, a week before it’s expected to announce earnings, Fubo was trading at just under $19 per share. That’s a market capitalization of $2.65 billion on what should be revenues of slightly over $400 million this year. Analysts expect it to report a loss of 42 cents per share on revenue of about $104 million.
In a streaming world dominated by Cloud Czars and former cable giants, Fubo is tiny. For investors seeking a pure play in this space, however, it’s the only card to play. That’s why, despite losing over half its value in 2021 after a Reddit-inspired short squeeze, FUBO stock is still selling at four times sales.
Fubo was launched as a collection of sport channels in 2015. Over the last few years, it has added content from CBSViacom (NASDAQ:VIAC), Walt Disney (NYSE:DIS) and Discovery (NASDAQ:DISCA) to become what’s called a “skinny bundle” cable alternative. That makes it a competitor to Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube, Disney’s Hulu+ Live TV and Dish Networks’ (NASDAQ:DISH) Sling.
But it’s sports that seems to be its future. Facebank, a European digital company originally called Pulse Evolution, merged to become FuboTV in March 2020. This was a half a year after it acquired Nexway, a German company that handles digital subscriptions.
Fubo has continued to acquire sports-streaming rights, most recently for World Cup qualifiers. This will be followed by the launch of its own Fubo Sportsbook, accompanied by an app, later this year. The sportsbook will put it in competition with companies like Flutter Entertainment (OTCMKTS:PDYPY), Penn National Gaming (NASDAQ:PENN), DraftKings (NASDAQ:DKNG) and Caesar’s Entertainment (NYSE:CZR), all of which are also several times larger than it.
Co-founder David Gansler has managed to ride the changes and maintain some ownership. Over the last year, Disney and Comcast (NASDAQ:CMCSA) have also held “tire kicking” stakes in Fubo, or parent Facebank. Neither has a controlling stake now.
What People Think
At the start of February, FUBO stock was trading at more than $50 per share. It had been at over $60 late in 2020. It’s now 75% off that level, leading to interest from the plaintiff’s bar.
The fall accelerated after Sling made a deal with DraftKings, moving quickly into the sportsbetting and programming niche Fubo hoped to occupy by itself.
But after the fall comes spring. Our own Louis Navellier is high on Fubo, saying the February highs were the result of a short squeeze that’s now over. He likes that Fubo added 92,800 subscribers during the fourth quarter and now has almost 550,000. (The subscriber number will drive the coming earnings report.)
Matt McCall, on the other hand, is more skeptical. He says the company’s move into sports betting is late. He calls streaming a low-margin business, Fubo’s sports rights niche and its big competitors dominating.
The Bottom Line on FUBO Stock
I’m not a gambler, but if I were to buy Fubo, it would be a bet it can be taken out by a larger player.
Whether you’re looking at the streaming or the betting side of the business, Fubo is surrounded by huge companies with big ambitions. To me, that makes it an attractive acquisition target. Institutions hold over 40% of the common, and over 50% of the float. A bid at $4 billion would likely be snapped up, leaving today’s buyer with a nice profit.
Companies aren’t usually bought when they’re at the top, but at the bottom. That’s where Fubo is now. Sharks like minnows.
At the time of publication, Dana Blankenhorn directly owned no shares, directly or indirectly, in any company mentioned in this article.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.