The last time I wrote about Fubo TV (NYSE:FUBO) in mid-July, I wondered how long it would take FUBO stock to hit $200.
And while I came away thinking it wouldn’t likely happen until sometime late in 2023 or into 2024, I did say that FUBO stock was definitely worth a lot more than $30.
On Aug. 10, FuboTV announced record Q2 2021 results. As a result, I would be shocked if it didn’t hit $40 by the end of the year.
There are three things that investors should watch closely when it comes to FuboTV: Paid subscribers, hours watched, and hours watched per paid subscriber. If all three are going up, it’s all good.
In the second quarter, Fubo had 681,721 paid subscribers. That was 138% higher than Q2 2020 and 91,291 higher than Q1 2021.
In addition, its customers streamed 245 million hours of television during the second quarter.
In my July article, I pointed out that the company’s Q1 2021 results showed that the hours watched per subscriber was 386.44.
In Q2 2021, hours watched per subscriber was 359.38, down 7% from the previous quarter.
However, compared to Q2 2020, which was 344.60, the hours watched per subscriber increased by a little more than 4% year-over-year.
While that’s not as much growth as I would like, it’s not bad when you consider the revenue it’s generating.
A Closer Look at FUBO Stock
Total revenue in the quarter was up 196% YOY to $130.9 million, with a 281% bump in ad sales to $16.5 million.
More importantly, the average revenue per user (ARPU) was $71.43 in Q2 2021, up 30% from Q2 2020 and 3.4% from $69.09 in Q1 2021.
So, from Q2 2019, through Q2 2021, FuboTV’s adjusted contribution margin (ACM) went from -4.4% in 2019 to 5.1% in 2020 to 8.3% in the latest quarter. That’s a 289% improvement over 24 months.
ACM is defined as ARPU less average cost per user (ACPU) divided by ARPU. So for every dollar of revenue it’s generating from its paid subscribers, it’s keeping 8.3 cents after its costs.
Think of FuboTV as the Whole Foods of video streaming.
I recommend you read FuboTV’s shareholder letter for the quarter. It’s beneficial to understand how it plans to differentiate itself from its video streaming competition.
“We believe that the delivery of a unified, personalized and interactive streaming experience is the future of this space and the key to capturing market share,” said CEO David Gandler and Executive Chairman Edgar Bronfman Jr.
The part that got me was its blurb about consumer fatigue.
“The broader industry has followed our lead on both fronts in recent weeks, repeatedly pointing to consumer fatigue as a consequence of actively managing numerous subscriptions,” Gandler stated.
I know this to be true because I’m experiencing that very fatigue. I’ve been signed up for Britbox for two months now at $8.99 a month, and I’ve watched almost nothing. Not because I don’t like their programming. I do, but because I never remember to go to the channel.
FuboTV’s goal is to provide “… consumers easy access to premium content, favorite sports teams and live TV channels at a fair price,” it states.
Maybe that’s why it nabbed almost 100,000 new paid subscribers in the quarter.
As a result of its strong quarter, it upped its full-year guidance to $565 million in sales and 915,000 paid subscribers, YOY increases of 116% and 67%, respectively.
The Bottom Line
I think it’s fair to say that two revenue streams will pave the way for FuboTV’s considerable growth: Ad sales and sports betting.
In 12 months, the company has managed to turn ad sales into a real revenue stream. At the end of Q2 2021, they accounted for 12.6% of overall revenue, up from 10.5% in the first quarter.
That might not seem like much, but if it does that — 20% sequential revenue growth — for the next four quarters, its Q2 2022 report will see ad sales hit $34 million, more than double what they are today.
As the shareholder letter states, it’s on track to launch the FuboTV Sportsbook sometime in the fourth quarter. It currently has agreements with casino operators in four states: Pennsylvania, Iowa, Indiana, and New Jersey.
“With our sportsbook, we are focused on becoming an emerging player across those states within which we will operate, and establishing and growing our market share in those regions over time.
“Our existing FuboTV business puts us at a distinct advantage here, as it allows us to leverage product integrations and marketing synergies that support our long-term gross margin targets in this segment.”
Anyone who’s followed the sports betting industry ought to find this to be a very attractive part of investing around $31.
While I say it will hit $40 by the end of the year, I believe a few more pieces of good news and FUBO stock could get there by the end of September, maybe sooner.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.