FuboTV (NYSE:FUBO) stock is at a positive inflection point.
When the company announced its second license for offering mobile event wagering in Arizona, it demonstrated that it sees sports betting as a legitimate market opportunity.
FUBO stock, which is stuck in a trading range, could break out to the upside next.
Investors who accumulated shares in recent months will get rewarded by holding longer.
On Sept. 2, FuboTV said that its subsidiary Fubo Gaming has been granted a Management Services Provider Certification from the Arizona Department of Gaming (ADG).
The unit may offer mobile event wagering in the state of Arizona. Fubo Gaming received its first approval in Iowa. At this pace, it is on track to launch Fubo Sportsbook, a mobile sportsbook, in Q4 of this year.
Fubo Gaming will deliver the wagering experience on “Watching Now.” Users may place sports bets alongside live streaming on FuboTV.
FuboTV demonstrated its interactive Fubo Sportsbook on Aug. 10. Viewers may switch channels on the streaming device to bring up the betting window on the mobile app. While watching the live game, they may bet in real-time.
Scott Butera, President of Fubo Gaming, said “We believe Fubo Sportsbook will add another exciting layer to the sports entertainment experience – one that will bring increased interaction and engagement between sports viewing and betting.”
Investors need only look at DraftKing’s (NASDAQ:DKNG) performance on the stock market to realize how FUBO shares may perform next.
DraftKings lets users enter fantasy sports-related contests. They can win money by picking the best individual play performances in various American sports.
Opportunity and Fubo Stock
ESPN wants to license its brands to sports-betting companies at $3 billion. DraftKings could sign a deal, demonstrating how big the sports betting market will become.
At current price-to-sales multiples of around 10 times, FUBO stock trades at less than half that of DKNG stock (22 times P/S).
Markets continue to discount FuboTV’s potential in the sports betting market. Even its core business justifies a higher valuation.
In the second quarter, the firm posted a total of 681,721 subscribers, up 138% year-over-year. Revenue almost doubled, up 196% year-over-year to $130.9 million.
Its advertising segment showed promise. Ad revenue almost tripled, rising by 281% year-over-year to $16.5 million.
FuboTV’s average revenue per user in advertising and subscriptions expanded in the quarter. As upselling and packaging efforts continue, investors should expect more advertisers to support the platform.
On its conference call, Chief Executive Officer David Gandler said that the strong subscription growth will drive its growth and that profitability will increase with sales and marketing expenses declining.
For example, those costs were 16% of revenue, down from 18% in Q1/2021.
Investors may reasonably expect that FuboTV will achieve its target of around $10 to $15 of advertising ARPU and having a 50% margin.
Price Target and Risks
Seven analysts who cover FuboTV have an average price target of $43.86, according to Tipranks. The price target range is wide, at between $30 and $60.
Analysts still expect a negative EPS in the next quarter. Still, the company is forming a positive trend with the reported EPS loss shrinking every quarter.
FuboTV’s subsidiary may face delays in getting mobile event wagering licenses in more states. So far, management has not indicated any concerns about missing a Q4 target launch for Fubo Sportsbook.
Despite having better relative valuations than DKNG stock, Fubo stock is still expensive compared to other established, profitable technology stocks.
Fortunately, the company’s strong subscription growth and foray into the sports betting market are strong tailwinds.
Growth investors should continue to take advantage of any dip. For example, trading volume was above average as FUBO stock fell to a low of $15.00 in May. It ended the day higher and continued to trend higher.
Your Fubo Stock Takeaway
FuboTV offers investors exposure to the wagering market and live streaming sports segment.
Both businesses are in the growth phase making the stock is well worth the premium. Chances are low that the stock will slip into a downtrend again.
With low chances of another sharp drop, investors should consider the stock at current levels.
On the date of publication, Chris Lau 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.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.