FuboTV (NASDAQ:FUBO), the sports-oriented cable streaming service, tried to rally for a second time in six months during August. But the FUBO stock rally reversed like a New York Mets winning streak.
Shares were due to open Sept. 2 at nearly $30, with a market cap of $4.1 billion on expected 2021 revenue of $416 million. Analysts continue to believe in it, but it’s proving to be a hard sell.
Like everyone else remotely focused on sports, FUBO stock is betting big on gamblers and soccer fans. It is launching free-to-play games and live stats for World Cup qualifying. The services are available on both phones and through streaming TV devices.
In its second quarter earnings release, fuboTV said it had 682,000 subscribers at the end of June and raised its earnings guidance. This caused an initial pop of 11% in FUBO stock, but that gain was all gone by the end of the month.
Revenue tripled to nearly $131 million, and ad revenue came in at $16.5 million. Customers streamed 245 million hours of programming during the quarter. CEO David Gandler predicted fuboTV could easily reach 3 million to 5 million subscribers in five years, and 900,000 by the end of this year. He said as many as 50 million people may eventually subscribe to cable services delivered through streaming.
But the market is crowded, and fuboTV remains a small player. Market analysts believe almost half the cable market will go through streaming by 2024. FuboTV’s market share remains in the mid-single digits.
The market is dominated by Walt Disney’s (NYSE:DIS) Hulu, Dish Networks’ (NASDAQ:DISH) Sling TV and Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) YouTube TV. The fourth quarter can be the worst of the year for the streamers, because the NFL remains tied to traditional broadcasting and cable. The league’s latest contract does contain streaming components, however, including a deal with Amazon (NASDAQ:AMZN).
Bring on the Gamblers
FuboTV bulls are pinning their hopes on gamblers.
The company debuted a “live sync” feature recently that can link subscribers directly to betting markets. It hopes to open its own sports book by the end of the year. It’s run by a company FuboTV acquired in January.
But the online sports gambling business is also very competitive. DraftKings (NASDAQ:DKNG), Penn National (NASDAQ:PENN), Flutter Entertainment (OTCMKTS:PDYPY) and Caesars’ Entertainment (NYSE:CZR) are all focused on it. So is Bally’s (NASDAQ:BALY), which links to regional sports cable networks run by Sinclair Broadcasting (NASDAQ:SBGI).
Analysts, however, see this as a game many players can win. The stock’s slump was temporary, they say, caused by fuboTV’s plans to sell $500 million in new shares. Several analysts are now pounding the table for FUBO stock, including our own Chris Lau, Nicholas Chahine and Will Ashworth, who says fuboTV could rise to $40 “before you know it.” David Moadel believes it could double quickly.
The Bottom Line on FUBO Stock
FuboTV’s small size and focus on gamblers could make it a very intriguing buy for a bigger player like Penn or Caesar’s. Big companies are lining up to take advantage of the new market, including Disney, whose ESPN has a deal with DraftKings.
FuboTV might also be in the sights of Fox (NASDAQ:FOX) or ViacomCBS (NASDAQ:VIAC), both of which have plays in the streaming space. Fox owns Tubi, a free streamer. ViacomCBS owns Pluto, a cable streamer like fuboTV.
Even if it’s not bought right away, fuboTV is very likely to grow from here. Streaming cable over the Internet is cheaper than buying it through the cable company. People like to gamble, and younger people like to gamble on sports.
Thus, FUBO stock is a stock for the patient speculator. This sounds like an oxymoron but it’s not. It just means that, if you buy now, you should expect to hold for a few years, until its profitability is proven or it’s sold.
The odds seem to be in your favor.
On the date of publication, Dana Blankenhorn held a long position in AMZN. 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 firstname.lastname@example.org or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.