FuboTV (NYSE:FUBO) reports fourth-quarter 2021 results after the markets close on Feb. 23. While I like FUBO stock for aggressive investors over the long haul, you’d have to have nerves of steel to buy the stock before it reports earnings.
There are a couple of reasons why.
Maybe most importantly, though, investors should look to Roku’s recent results as a guiding light. Here’s what investors should know about FUBO stock moving forward.
FUBO Stock May Soon Follow Roku
Roku (NASDAQ:ROKU) reported its Q4 2021 results back on Feb. 17. Unfortunately, shares of the company got slammed due to a combination of lower-than-expected sales and poor guidance for the first quarter of 2022. Currently, ROKU stock is down 46% year-to-date (YTD). It’s at its lowest level since June 2020.
How bad were the results and guidance?
On the Q4 2021 front, Roku had sales of $865.3 million, almost $30 million less than the analyst estimate. What scared investors wasn’t the $30 million miss, however. Instead, it was the the year-over-year (YOY) growth rate of 33% — 18 percentage points less than its Q3 2022 YOY sales growth of 51%.
Now, in Q1 2022, Roku expects revenue of $720 million. That implies 25% YOY growth, an obvious deceleration.
What gives? And why should FUBO stock investors be concerned?
For the first question, the company got hit on two fronts. Per CNBC, Roku CEO Anthony Wood and CFO Steve Louden noted the following:
“Overall TV unit sales are likely to remain below pre-Covid levels, which could affect our active account growth […] On the monetization side, delayed ad spend in verticals most impacted by supply/demand imbalances may continue into 2022.”
So, the supply chain is hurting Roku both in terms of adding new active accounts and generating advertising. There’s not much the company can do except push through it. However, I consider Wood to be an excellent CEO, so I’m confident he’ll do just that. I really like ROKU stock at these prices if you’re an aggressive investor.
And as for the second question? Well, investors are rightly concerned that FUBO could face a similar fate when it announces its latest results. As InvestorPlace’s Louis Navellier recently wrote, a serious deceleration in revenues will make it that much tougher for Roku to deliver future profits. As a result, a poor report will push FUBO stock even lower than where it currently trades at around $8.40.
While there’s no question FuboTV’s share price has been pummeled since November — when it traded over $30 — the markets right now aren’t being kind to earnings misses and weak guidance. As a result, the stock could fall even further after Feb. 23.
Sports Betting Is No Sure Thing
There’s another thing that Louis Navellier mentioned which shouldn’t be ignored, though: FuboTV’s push into sports betting. The analyst had the following to say:
“Once extremely bullish on the online gambling legalization trend, investors have soured on the space. In large part, due to high customer acquisition costs. Most i-gaming companies are spending heavily on marketing and promotions, to lock down market share.”
In his article, Navellier pointed out that larger competitors are rolling out sportsbooks at a much faster pace. And they’re grabbing a chunk of market share in the process. As a result, FuboTV may spend a ton of money on its sportsbook to gain little or no new subscribers.
In that situation, the company would be losing money on two fronts without much hope of scaling either of its businesses. That’s a lose-lose proposition for FUBO stock.
The Bottom Line on FuboTV
Back in mid-January, I said the following about FuboTV:
“In Q3 2021, its average revenue per user (ARPU) was $74.54, 10% higher than a year earlier and 4.4% higher than in Q2 2021. So as long as it continues to increase ARPU on a sequential basis while increasing the number of subscribers by 30%+, I don’t see how it doesn’t get to profitability sooner rather than later.”
I still believe this is a valid hypothesis. That said, I don’t believe the risk-reward proposition for investors is in their favor here until we know whether FuboTV faces a similar fate to Roku.
Therefore, I would wait until the earnings come out — taking into account ARPU and its subscriber base — and reassess the investment thesis at that time. Until then, avoid FUBO stock.
On the date of publication, Will Ashworth did not hold (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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
