FUBO (NASDAQ:FUBO) is well on its way to becoming the cable alternative for young men, and FUBO stock may not fully recognize the potential in that.
FUBO stock has gotten a pop after two positive earnings releases. The most recent one, delivered in August, showed it with $131 million in revenue and nearly 682,000 customers.
The last number is the key. It costs very little for a streamer to add customers. If FUBO reaches CEO David Gandler’s goal of 5 million subscribers it could be very profitable. It would also be very valuable for any of the larger players surrounding it in the streaming market.
Fubo has sought to distinguish itself by selling content young men will like, primarily sports.
Unlike Alphabet’s (NASDAQ:GOOGL,GOOG), YouTube TV, Dish Networks’ (NASDAQ:DISH) Sling, Walt Disney’s (NYSE:DIS) Hulu with Live TV or ViacomCBS’ (NASDAQ:VIAC) Philo, it has a clearly defined niche.
It also has a clear strategy, combining live sports with gambling.
FUBO is one of the few cable alternatives offering NFL RedZone, which follows all the games live. It is signing up sports teams for local streaming. It’s also signing up teams to partner with its sportsbook while lining up deals to offer the sportsbook with individual states.
The sportsbook launches in the fourth quarter of the year. It will initially be available in just five states, through existing casinos or sportsbook operators. But it promises to turbocharge Fubo results, giving it a piece of the mobile gambling action, while the business extends across the country.
Fubo doesn’t necessarily need a turbocharger. The first-quarter numbers reported in May, $120 million in revenue from 590,000 subscribers, gave it that. It’s still losing money, but investors pay for growth.
A Closer Look at FUBO Stock
In addition to promising new revenue streams, gaming also puts FUBO stock on the radar of big casino operators. FUBO stock opens today at around $27. That’s a market cap of nearly $4.2 billion on expected revenue of $420 million.
That sounds expensive, but it’s on a par with Caesar’s Entertainment (NYSE:CZR), which is worth $22 billion and has just begun to buy ads for its sportsbook.
FUBO might also look nice inside DraftKings (NASDAQ:DKNG), worth $25 billion, PENN National (NASDAQ:PENN), worth $12.5 billion, or Europe’s Flutter Entertainment (OTCMKTS:PDYPY), worth $34 billion.
All these players will be looking at what happens with Bally’s Entertainment (NASDAQ:BALY), which is combining programming and gambling alongside Sinclair Broadcasting’s (NASDAQ:SBGI) regional sports channels.
I am not a Fubo customer, but I’ve written favorably about the stock. I called it a good long-term speculation early this month, despite its being a small fish in a big pond. Analysts at Tipranks also like FUBO, with 6 of 7 saying you should buy it.
Caution is advised by our Stavros Georgiadis, who believes Fubo to be overvalued. Our Larry Ramer sees it as too dependent on soccer. These are risks worth considering.
The Bottom Line
FUBO stock is a speculation.
If it can’t get sports programming it needs (it’s currently missing TNT basketball), or sports gambling slows, you could lose money. This is especially true in the near term. The stock is trading at 10 times revenue and the company is still losing money.
But I think FUBO’s status as a take-out gives you some downside protection. I think its clearly defined niche protects it against the many sharks in the water. If you have sporting blood, this may be a good bet to lay down. It can’t be worse than the Atlanta Falcons.
On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
