Investing in fuboTV (NYSE:FUBO) stock makes sense currently. Things are far from perfect for the company. But with a few tweaks and the benefit of a long-term view, investors could benefit richly.
Let’s jump into those earnings for the sports streaming company.
Growth is Promising
One of the primary reasons to get on board with FUBO stock is that the company is rapidly growing its subscriber base. Between Q3 and Q4 of 2020 the company gained 93,000 subscribers. That meant that it ended 2020 with a subscriber base of 548,000. During the same period in 2021 it added 185,000 new subscribers and ended the year with a subscriber base of 1.13 million.
So, its subscriber base more than doubled while Q3 to Q4 sequential growth lagged slightly behind. Overall the news there is positive. That said, fuboTV has at least one issue it needs to solve.
At the macro level fuboTV’s ad revenue does not immediately appear to be a problem. After all, it increased by 98% in the fourth quarter on a year-over-year basis. But that should be taken with a grain of salt because remember, fuboTV’s subscriber base more than doubled in the same time period.
That can mean only one thing: The average revenue per user (ARPU) from ads declined. And that is indeed what happened. FuboTV received $8.47 in advertising ARPU in the fourth quarter of 2020. That figure declined by 4% to $8.12 by the fourth quarter of 2021.
Ultimately, fuboTV has to find a way to increase the amount of ad revenue it receives from its subscriber base. The good news is that the firm was able to increase the average revenue per user between Q4 2020 and Q4 2021. So, while ad revenue declined on average the firm’s ARPU increased from $69.19 to $74.52. Investors will have their own subjective conclusion about whether that is good or bad overall.
Take a Long-Term View on FUBO Stock
FuboTV is still losing money. In the fourth quarter it posted a net loss of $112 million. That can’t be attractive in a hard money market like the one we’re currently in, can it? I’d agree with you in most cases. It is difficult to suggest anyone back growth firms right now. The Fed won’t help as it is going to raise rates throughout 2022.
But fuboTV reached an inflection point in my estimation. Its net losses peaked in the quarter that ended Dec. 31, 2020. Those losses hit $195 million, up from $55 million a year earlier. Now they’re down to $111.9 million from $195 million.
The reason is pretty clear: Expenses as a percentage of revenue continue to improve steadily. They still aren’t stellar, though. The firm’s expenses as a percentage of revenue decreased, but only to 147.6%. That represented a significant drop from the 187.9% figure a year earlier, but it plainly requires more work. The company can’t spend $1.47 to receive $1 in revenue. That isn’t sustainable.
But the company’s fundamentals are headed in the right direction. And that’s why it makes sense to invest with a buy-and-hold mindset.
Interest rates are going to rise. That will further impact how the markets view growth stocks like FUBO. But a time will come when sentiment changes and growth comes back into vogue. If fuboTV continues to improve fundamentally between now and then, it will rise again.
It wasn’t that long ago that FUBO stock traded at prices quadruple what they are now. That implies a real shot at multiplying your capital when market cyclicality runs its normal course.
Is it a guaranteed gain? No. But it is a tried-and-true method that investors have been using to play growth stocks for a long time.
On the date of publication, Alex Sirois 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.