- fuboTV is down in the dumps, with the stock down almost 78% from its peak on Nov. 4.
- The subscription TV streaming and online sports wagering company expects its subscriber base to rise substantially.
- FUBO stock could double from here, especially if its price-to-sales (P/S) multiple rises with sales growth.
fuboTV Inc. (NASDAQ:FUBO), the TV subscription and online gambling service, is growing by leaps and bounds. But don’t tell that to the stock market, as FUBO stock is off 78% from its peak, falling from $35.10 on Nov. 4. As of March 21, it was down to $7.53.
That also means that year-to-date (YTD), the stock is down over 51% from $15.52 to $7.53 in almost three months. It is almost as if the stock market thinks the company is going out of business. But it clearly is not.
Where Things Stand With fuboTV
On Feb. 23, fuboTV released its fourth quarter (Q4) earnings and provided guidance for Q1 subscriptions and revenue. The company said that the Q1 subscriber base will grow from 1.1 million at the end of 2021 to a range of between 1.263 and 1.273 million. That represents an increase between 14.8% and 15.45% in Q1 alone. The midpoint rise is 1.268 million, or up 15.3%.
This simply does not coincide with a stock that is down 78% from its peak and 51% YTD.
And it is not as if FUBO stock was or is super overvalued. Let’s look at the numbers. Right now, analysts forecast that 2022 sales will reach $1.12 billion. That will be 75% above its $638 million in revenue in 2021.
So, at the market capitalization of $1.16 billion as of this writing, that puts FUBO stock squarely at 1.04x times sales — just over 1x sales. But there will be a 51% growth in its subscriber base and a 75% rise in sales. So, it seems like a ratio of 1.6 to 1.7 would be more appropriate. That is what would happen if we used a 1:1 relationship between the growth metrics and the gain in the P/S multiple.
This puts fuboTV’s market value at $1.848 billion at the midpoint (i.e., $1.12b sales x 1.65). This means FUBO stock could rise 59.3%.
In short, our price target is at least $12 per share (i.e., 1.593 x $7.53 price as of March 21).
Where This Leaves Investors in FUBO Stock
It seems that Wall Street agrees with me that this stock seems ridiculously cheap. For example, TipRanks reports that 11 Street analysts who have written about FUBO stock in the last three months have an average price target of $15.25. That represents an upside of 102.5% from $7.53.
Refinitiv reports its survey, published in Yahoo! Finance, shows that nine analysts have an average target of $16.11. That is almost 114% over $7.53.
In other words, analysts are still very positive on the stock. Their valuations are much higher than my conservative estimate using P/S and a 1:1 metric-to-P/S valuation methodology. No worries, though, since even if analysts’ target prices fall to my price, there is still a huge upside in the stock.
In fact, just to be even more conservative and to provide a further margin of safety, let’s say it takes two years for FUBO stock to rise the 59.3% as I am projecting. That works out to an average annual compounded return in each of the next two years of 26.2%.
If the stock rises this year by 26.2%, it would reach $9.50. But let’s be serious. I don’t really think this will happen. If the subscriber and revenue growth comes in as forecasted by the end of the year, FUBO stock will be at least double its present price. In other words, analysts will be right.
On the date of publication, Mark Hake 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.