fuboTV (NYSE:FUBO) is a long way from its $62.29 peak set in December 2020. The Nasdaq’s sudden correction in February sent FUBO stock into a downtrend. And while the stocks that make up most of the Nasdaq – FAANGM – have recovered, fuboTV is well below $20.
What happened?
Investors lost interest in the live sports and TV streaming company. Fubo’s pivot toward sports gambling, which would complement its core offering, is in the works. Until then, investors are unwilling to bid higher for the company’s shares.
Fubo’s Catalysts
S&P Global recently predicted that cord cutting would accelerate in 2021 and 2022. But online multichannel television programming distributors (MVPDs), including fuboTV, will benefit from the shift.
At first, investors swarmed on Fubo’s shares. But the stock’s momentum turned downwards after it tried, but failed, to break out above $50 – $60 on at least two occasions.
Bears are now accumulating a short position in the stock. Almost 15% of the stock’s float is now being shorted.
The Opportunity Presented by FUBO Stock
Fubo’s president, Jordan Fiksenbaum, resigned his position, effective immediately, on March 12. Skittish investors are overreacting to the President’s resignation Fiksenbaum was not the company’s CEO; he was the second-in-command. This is akin to an offensive coordinator leaving a football team.
In its last earnings report, fuboTV forecast 2021 revenue in the range of $460 – $470 million, representing a 65%-80% year-over-year jump. It also expected subscribers to jump 39%-41% YOY to 760,000 – 770,000. Conversely, Netflix (NASDAQ:NFLX) posted a slowdown in subscribers in its last quarter. Also, Pinterest (NYSE:PINS) posted uninspiring user growth. The social networking website predicted that its user growth would slow as the pandemic ends. PINS stock and NFLX stock sank sharply on the news.
As a result, I think that FUBO stock could slump even if its subscriber growth meets expectations when it reports its Q1 results on May 11. And the company may also lower its user growth expectations as the work-from-home trend wanes. So the chances are high that the company’s Q1 results will disappoint investors.
Headwinds Dissipating
Archegos Capital’s liquidation on March 28 accelerated the drop in fuboTV’s shares. With the orderly wind-down of Bill Hwang’s investments ending, bargain hunters may look at fuboTV’s drop as temporary. Furthermore, investors may coordinate the purchase of the company’s shares to create a “short squeeze” in the stock.
In January, investors ,chatting on Reddit, discussed buying GameStop (NYSE:GME) stock, leading to a major short-squeeze in the name. The same kind of phenomenon could happen to fuboTV. But first it will need to convince retail investors that its addressable market is expanding. In order to do so, Fubo must meet its goal of enabling its viewers in three states to bet on sports by the end of the year .
Fair Value
Six analysts rate fuboTV as a “buy,” and their average price target is $45.43, according to tipranks. I utilized a five-year discounted cash flow growth exit model and made the following assumptions:
| Metrics | Range | Conclusion |
| Discount Rate | 11.0% – 9.0% | 10.00% |
| Perpetuity Growth Rate | 0.0% – 0.5% | 0.00% |
| Fair Value | $25 – $27.03 | $25.90 |
Note: Readers may click above and edit the metrics to recalculate a new fair value for the shares.
Use a 10% discount rate to price in unforeseen events, such as longer-than-expected waits for states to legalize sports gambling.
Even if Fubo’s growth rate stays flat for the foreseeable future, fuboTV is worth at least $25 per share.
fuboTV is losing its fans on Wall Street. That creates a discount and a good buying opportunity for investors willing to bet that the company’s subscriber base will grow meaningfully. Its online gambling initiatives are a bonus.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.
