- FuboTV (FUBO) stock has lost over half its value in 2022
- Sports betting is out of favor, for now, but revenues are still growing ahead of plan
- The market will come around on FUBO stock but it might be awhile
FuboTV (NASDAQ:FUBO) is an unprofitable growth stock in a market that hates unprofitable growth stocks. But FUBO is not the Russian invasion, Fouled Up Beyond All Recognition (FUBAR).
FUBO stock is down 55% since the start of the year, even while management at the cable replacement company praises itself for sticking to its growth path. Losses of $111 million on revenue of $231 million, however, were not what the market wanted to see.
In their quarterly earnings release of Feb. 23, FuboTV management confidently predicted revenues of over $1 billion in 2022, after hitting $638 million for 2021. The company’s market capitalization entering trade March 28 was $1.07 billion.
If you believed in growth, as I did when I bought a few shares, you’re out of luck right now. Will our luck ever return?
FUBO Stock Is Out of Fashion
The tech wreck, inflation and the Ukraine war have combined to hammer FUBO stock while doing nothing to the business case. The business case is to gain a niche as a sports-oriented streaming cable offering, then use that niche to get into sports betting.
The question is whether fashions will change, and when. If they do, shares bought at $22 may look cheap in a few years. The stock opened March 28 at $7.
While I still expressed confidence in FUBO stock in January , it wasn’t without caveats. It costs a lot of cash to bring bettors to the table. Even companies with physical casinos like Caesars Entertainment (NYSE:CZR) have had to pull back over those costs.
There’s competition for FUBO in every direction. DraftKings (NASDAQ:DKNG) comes out of fantasy sports. Flutter Entertainment (OTCMKTS:PDYPY) comes out of European sports betting. Caesar’s and Penn National (NASDAQ:PENN) come from the physical casino world. Sinclair Broadcasting (NYSE:SBGI) owns Regional Sports Networks and has a mobile betting app under the Bally’s (NYSE:BALY) name.
Full Steam Ahead
Despite this there are analysts still pounding the table for FUBO stock. They argue that the company’s growth plan is working. Soaring revenue and crashing stock prices don’t go in tandem for long, they argue, and profits will follow.
What you need is a belief that the war will end, after which people will wish to be entertained. FuboTV is a service you can easily live without. But despite everything America remains a wealthy country. The money is there to be thrown around. FUBO just wants its share. The company’s fourth quarter, while unprofitable, did beat expectations on revenue.
The Bottom Line on FUBO Stock
Do I regret putting even a few thousand dollars into FUBO stock? Yes.
Am I throwing in my hand? No.
FUBO didn’t fade because of anything management did. FUBO delivered what was promised, rapid revenue growth in what should be a growing niche. The problem is that the market no longer values what FUBO stock offers.
That means FUBO fell over fashion, not on fundamentals. Fashions change. Fundamentals don’t. Based on fundamentals, FUBO is a buy here, trading at near its estimated 2023 revenue and with profitability in sight. But it will take time for the market to see that, and the market can be wrong a lot longer than you can stay solvent.
My guess is that the next move in sports betting will be toward consolidation. A better-capitalized company like Flutter, Caesar’s or Paramount Global (NASDAQ:PARA) could snap up FUBO at a fat premium to today’s price, but for less than I paid for my shares. That’s my only hope for breaking even any time soon.