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Wed, February 8 at 8:00PM ET

Competition Everywhere: The Fall of FuboTV Stock

There doesn’t seem to be much news to justify the big drop in shares of FuboTV (NASDAQ:FUBO). If anything, it’s the opposite. The live streaming company announced two deals this week. First, it signed a multi-year carriage agreement with Spanish-language media company Hemisphere Media Group. And today, it announced it would be the exclusive carrier of England’s Premier League in the Canadian market for the next three seasons. Yet, FUBO stock is down 7% in the past two days and has lost around 60% of its value since early November.

A picture of a FuboTV (FUBO) logo on a smart phone against a computer keyboard.
Source: Lori Butcher/ShutterStock.com

In an attempt to prop up shares, the streaming cable company announced preliminary fourth-quarter and 2021 results on Jan. 10. Management focused on two things. First, full-year revenue is expected to surge 138% to 140%, hitting $622 million to $627 million. Second, FuboTV expects it more than doubled the number of paid subscribers in 2021, ending the year with upward of  1.1 million.

“Both revenue and subscriber metrics are expected to exceed previously issued guidance resulting in a record quarter and year for FuboTV,” the release said.

While that all sounds good, even when the final results are in, they may not halt the slide in FUBO stock. That’s because there’s something important missing from FuboTV’s preliminary earnings results.

No Profit, Big Problem

What’s missing from FuboTV’s recent financial release is any talk of profit.

FuboTV posted a bigger-than-expected loss of $105.9 million, or 74 cents per share, for the third quarter on revenue of $156.7 million. Through the first three quarters of 2021, the company lost $271 million. While losses are shrinking on a year-over-year basis, FuboTV is not expected to turn a profit for the next few years.

My InvestorPlace colleague Will Ashworth, who was bullish on FUBO stock as recently as November, admitted after the third-quarter results were released that the investment thesis had broken down. He wasn’t the only one caught offside. I took a small position in FUBO stock after a September write-up and I’m out a few thousand dollars.

FuboTV Investing Ahead of Growth

FuboTV’s $65-a-month live TV streaming service has plenty of competition. The ones that immediately come to mind are Alphabet’s (NASDAQ:GOOGL) YouTube TV, ViacomCBS’ (NASDAQ:VIAC) Pluto TV and Walt Disney’s (NYSE:DIS) Hulu.

However, FuboTV has many sports channels that aren’t offered by its competitors. These include both English-language channels like BeIN Sports, and Spanish-language channels like Universo and TUDN, which show soccer.

It also offers some regional sports networks for an additional fee. But it still lacks a carriage deal with Sinclair Broadcast’s (NASDAQ:SBGI) Bally Sports, the largest owner of regional sports networks.

Like most growth companies, Fubo has been investing ahead of growth. During the fourth quarter, it bought Balto Sports, a startup that develops tools for fantasy sports games. FuboTV CEO David Gandler called the acquisition a key first step into the online sports wagering market, stating:

The acquisition of Balto Sports will enable us to build a first-class, free-to-play experience that brings consumers the best games around live sports. From there, we see a natural progression to layer on real money wagering in regulated markets complementing fuboTV’s live streaming video for a highly engaging user experience within our platform.

Fubo also bought the Paris-based Molotov streaming platform in December in hopes it will spur international growth. Molotov has about 4 million viewers across its two services. The $190 million deal is 85% stock. 

Wanna Bet?

What’s most exciting to investors in FUBO stock is probably Fubo Sportsbook, an online betting app that launched in Iowa in early November and is now live in Arizona as well.

So far, 18 states have legalized online sports betting with New York being the latest. In addition to Iowa and Arizona, Fubo has obtained market access agreements in three other states: Pennsylvania, Indiana and New Jersey.

However, big investors have soured on mobile sports betting. For instance, hedge fund manager Jim Chanos recently said he was short DraftKings (NASDAQ:DKNG), calling its business model flawed. Others expect bankruptcies in the space due to high customer acquisition costs and competition.

FUBO stock has been caught up in a downdraft hitting all sports betting stocks, including DraftKings, Penn National (NASDAQ:PENN) and Caesars Entertainment (NASDAQ:CZR). It also faces competition from Sinclair, which now wants to stream its regional sports networks with a Bally Bet app launched last year.

Oh, and if you want one more reason to worry, Sam Rattner, who sold his Vigtory sports betting app to FuboTV 10 months ago, resigned from Fubo Gaming earlier this month.

The Bottom Line on FUBO Stock

The breakdown in FUBO stock happened without a dramatic increase in short interest. About 15.2% of shares were being held short at the end of December, which was less than in the previous reporting period. Today, short interest stands around 16%.

It’s going to cost big money to play the sports betting game. Analysts are expecting rapid consolidation. Caesar’s has the cash to compete, having launched an extensive national TV ad campaign in early August. Its stock is roughly flat since then while the price of FUBO stock has been cut in half.

FuboTV could still come good, but there’s more risk in its shares now.

On the date of publication, Dana Blankenhorn held a long position in FUBO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.

Article printed from InvestorPlace Media, https://investorplace.com/2022/01/competition-everywhere-the-fall-of-fubo-stock/.

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