Shares of fuboTV (NYSE:FUBO) are in a free-fall of late, having lost over 65% value in the past three months. This is a surprise, considering how its been killing it over the past several quarters. Its platform has grown incredibly in subscriber numbers and has significantly improved its monetization. Hence, the downtrend is an excellent opportunity to pick up FUBO stock at a massive bargain.
fuboTV is an emerging leader in the virtual multichannel video programming distributor (vMVPD) space. It’s primarily a sports streaming platform but has now considerably increased its content slate.
Nevertheless, its management believes that sports streaming and online sports betting (OSB) will continue to be the key growth driver for the company.
With FUBO stock sliding to new lows, it now trades at a highly attractive valuation compared to its peers. It currently trades at just 2.5 times forward sales, which is remarkably lower than other over the top (OTT) platforms. These results are puzzling considering the triple-digit growth in sales on a year-over-year basis.
Preliminary Fourth Quarter Results
It’s not usual for companies to release their earnings results ahead of schedule. If it happens, though, it’s usually because they either fared exceedingly well during the quarter or the complete opposite. Judging from fuboTV’s recent results, it was naturally the former.
The company management revealed that top-line and subscriber numbers comfortably beat their estimates. The guidance indicated revenues to fall in the $205 million and $210 million range in the third quarter. However, the preliminary numbers show a healthy $10 million increase from the earlier forecast. Moreover, subscriber growth will come in 40,000 higher than the lower-end guidance of 1.06 million.
Nevertheless, the company didn’t report any profitability numbers. Its consistent losses have also negatively impacted its financial flexibility. Fortunately, its cash balance of $375 million has just dropped by 4.6% from the previous quarter.
According to the company CEO David Gandler. “In the fourth quarter, we continued to deliver triple digit revenue growth, alongside operating leverage, through the efficient deployment of acquisition spend and the retention of high quality customer cohorts.” Overall, the results are highly encouraging and show that the company growth rate isn’t slowing down anytime soon.
Improving Monetization Capabilities
One of the key problems with fuboTV’s content aggregation model is that it comes with razor-thin margins. This is why its gross profit margin is at a negative 0.4% on a trailing-twelve-month basis.
Advertising and sports betting are two major growth catalysts that could significantly improve the platform’s margins as it looks to scale up.
User acquisition costs have been a problem for OSBs. However, fuboTV has a leg up over its competition with an already engaged audience of sports fans. Hence, it wouldn’t have to spend much money acquiring new users, unlike most peers. According to Goldman Sachs, the OSB sector could be worth nearly $40 billion by 2033.
Furthermore, the advertising opportunity that fuboTV will be cashing into soon. The company, with its data-driven insights, can meaningfully boost advertising revenues. Cost-per-mile (CPM) is still in the low $ 20’s for the company, which has plenty of room to grow to expand fuboTV’s connected advertising share.
FuboTV has been a growth machine in the past year, but its stellar performance hasn’t resonated with investors. It continues to expand its subscriber and revenue base with every passing quarter. Moreover, it is moving into the advertising and sports betting verticals to improve its margin.
Additionally, its preliminary fourth-quarter results are solid and suggest a strong finish to the year. Hence, FUBO is a stock you can’t pass up on at this time.
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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.