FuboTV (NYSE:FUBO) has been growing at an impressive pace in the streaming realm. The return of live sports is seen clearly in the company’s results with a 196% growth in year-over-year revenues in its second quarter. Moreover, we can now see a healthy progression towards profitability. With an incredible growth runway ahead, especially with its ad business, FUBO stock is trading at just 7x forward sales.
FuboTV was listed on the stock exchange in October last year. The sports-first streaming platform valued its shares for $10, and they went as high as $62 before fading from their highs.
The platform has built a phenomenal head of steam since its IPO with a 25% jump in paid subscribers and triple-digit revenue growth. The company still has many remaining upside, which hasn’t been priced in yet, making it a long-term winner.
The Long Term Case
FuboTV has been on a roll of late, benefiting from the pandemic-induced tailwinds. Streaming platforms, in particular, have proven to be winners, with the over 30% of American households expected to cancel their cable subscriptions by 2024.
The platform added 91,291 subscribers in its second quarter, exhibiting 138% growth on a year-over-year basis. Moreover, content hours rose 148% year-over-year to 245 million. Based on a management forecast, the subscriber base will rise from roughly 682,000 to 920,000 by the year’s close.
Furthermore, the company is doing remarkably concerning customer monetization. The average revenue per user gauges how effectively the platform monetizes its subscriber base. Its second-quarter ARPU was up 30% from the prior-year period to $71.43.
Additionally, its revenue growth has been top-notch, boasting a 196% increase on a year-over-year basis to $130.9 million. Apart from monetizing users through subscriptions, it’s also building a robust ad business that will likely experience massive growth.
FuboTV still isn’t profitable, though. Its operating loss was at $81 million, and it needs to address rising operational expenses. Like other streaming platforms, subscriber growth is perhaps more vital than short-term profits.
The company has done well to improve its expense ratio from last year to 155.3% as a percentage of total sales. However, there is still a lot of work to be done, and subscriber-related costs need to be curbed significantly to improve the outlook.
The Potential Of fuboTV’s Ad Business
FuboTV’s ad business is a big and potentially undervalued sales growth opportunity for the company. Ad sales during the second quarter were up a staggering 281% to $16.5 million on a year-over-year basis. Moreover, advertising per user surged 62% from the prior-year period.
Currently, its advertising business totals up to just 13% of the company’s total business. It has achieved this figure far ahead of its estimates for the fourth quarter this year. This is imperative because investors will then come around the idea that the company may have a sizeable advertising business that will dramatically increase profitability.
Furthermore, the platform is investing in improving its product catalog and its appeal to advertisers. In doing so, it launched a content studio in May, enabling advertisers to work with fuboTV’s creative team to produce customized content. Direct-access partnerships offer advertisers greater value and are likely to push fuboTV’s ad business to the next level.
Final Word On FUBO Stock
FUBO stock hasn’t performed well in the market in the past few months, despite its stellar operating results. It continues to expand its subscriber base and its ad business which has massive long-term potential.
The stock has plenty of upside and trades at a relatively cheap valuation based on its healthy long-term growth runway. Therefore, it’s best to invest in FUBO stock for the long term.
On the date of publication, Muslim Farooque 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.