FuboTV (NYSE:FUBO) released guidance for its fourth quarter earnings on Jan. 10, even though its actual full Q4 earnings aren’t coming out until Feb. 23. It wanted to get its story out quickly since its growth is nothing like the stalled growth at Netflix (NASDAQ:NFLX). So even though FUBO stock was hurt by the fall in NFLX stock, it doesn’t deserve this.
The main reason is its growth rate is much better than at Netflix. At some point, this will flow through into the stock price.
After peaking at $33.87 on Nov. 3, 2021, FUBO stock has tumbled to just about $10 ($10.07) as of Feb. 7, 2022. That is a steep decline of $23.8, or 70.3% in the space of just three months.
To put it simply, that is just too much. FUBO stock is worth more than this.
Where Things Stand With FuboTV
FuboTV is an up-and-coming streaming service that also allows online sports betting. Its growth rate is still on a steep upward trajectory.
For example, in its preliminary earnings release, fuboTV said that its revenue will be up higher than the previous guidance it had provided. In the past, fuboTV projected revenue of $205 to $210 million, compared to a year ago, vs. $105.08 million in Q4 2020. That was a potential gain of 95% to 100% year-over-year (YoY).
But now, its revenue will be between $215 million to $222 million, a YoY gain of 105% to 109%. This is a significant increase of 9% to 10% more YoY growth than its prior guidance.
That doesn’t deserve a significantly lower stock price.
Moreover, fuboTV’s year-end paid subscribers will exceed 1.1 million, more than 100% higher YoY. Prior guidance was for just 1.06 to 1.07 million subscribers.
By contrast, for example, Netflix had an 8.2% growth rate in Q4 and guided for just an 8.0% increase in its paid memberships for the first quarter of 2022. A year earlier it had a growth rate of over 21.9% YoY in Q1 2020. You can see this in a table in my article earlier last week on Netflix.
So you can see there is a wide chasm between the growth rates at fuboTV vs. Netflix — i.e., 100% vs. 8.2%. Even though fuboTV didn’t provide guidance for Q1 2022, as it will likely do on Feb. 23, it’s likely to be significantly higher than at Netflix.
Where This Leaves FuboTV
Analysts are extremely positive about the stock. For example, TipRanks reports that its survey of nine analysts who have written on the stock in the last three months have an average price target of $28.83. That is 186% higher than the price today (Feb. 7) of $10.07 per share.
The same is true at Yahoo! Finance, which uses the Refinitiv analyst survey data. The average price target for FUBO stock from 10 analysts is $33 per share, or 227.7% higher than today.
The point is that just like there is a wide chasm between fuboTV and Netflix in terms of growth rates, there is a wide chasm between FUBO stock and its real value. This divergence from underlying value and its price can’t last for long, at least in the long run.
As a result, expect to see FUBO stock make a turnaround sometime after its earnings come out on Feb. 23.
What To Do With FUBO Stock
In my last article, I showed how FUBO stock could be worth $26.54 per share. This is based on its projected 2023 revenue growth and a similar price-to-sales (P/S) multiple as Netflix. However, it was also before the company gave its recent update higher revenue guidance. So, if anything, my price target is too low. That can be a margin of safety for value investors.
Moreover, other analysts have average price targets ranging from $28.83 to $33 per share. The point is that a lot of people think this stock is woefully undervalued.
This means that if fuboTV’s guidance for Q1 is anywhere near its recent growth, the market is going to realize the wide discrepancy between its value and its market price.
But, in the meantime, given that the company has already given the headlines of its Q4 earnings, the patient value investor will likely want to get started. Taking a toe-hold position, or averaging down before the full earnings come out on Feb. 23 is probably the best move here.
On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) 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.
Mark Hake writes about personal finance on mrhake.medium.com and Newsbreak.com runs the Total Yield Value Guide which you can review here.
