An Upset Victory for FuboTV Stock Is Too Far Off to Make it a Buy Today

  • Due to many reasons, FuboTV (FUBO) stock has collapsed in price.
  • Past risks that played a role in its massive decline in price remain on the table.
  • A partial recovery would mean big returns, but as a path to profitability remains up in the air; there’s plenty of time to buy ahead of one.
A picture of a FuboTV (FUBO) logo on a smart phone against a computer keyboard.
Source: Lori Butcher/ShutterStock.com

In the less than two years it’s been a public company, FuboTV (NYSE:FUBO) stock has gone from heavy favorite to heavy underdog. This has left anyone who has bought FUBO stock since it hit its all-time high ($62 per share) in December 2020 sitting underwater on their positions. At around $4.72 per share today, it’s almost 70% below its high-water mark.

As it has found support at this price level, you may think that it’s starting to bottom out. Add in the fact it continues to deliver strong revenue growth, and it may even look like a buying opportunity. However, think twice before buying it immediately.

Why? Key issues that have knocked it lower remain on the table. New risks could emerge in the months ahead. Even if these issues fail to hinder its continued revenue growth, if profitability remains elusive, it’s hard to see shares making a move back to substantially higher prices within a reasonable timeframe.

With this, continuing to take a “wait and see” approach with the sports streaming/sports betting company, like I’ve recommended before, may be the better move.

FUBO FuboTV $$6.7

The Situation With FUBO Stock Today

Much of the decline in the price of FuboTV has been due to changes in market sentiment. Rising interest rates, and the Federal Reserve’s rate hike plans, have resulted in investors no longer giving growth plays such sky-high valuations.

Changes in the market’s sentiment about sports betting stocks have also had an impact. Investors have gone from bullish to bearish on the space, due to concerns high marketing costs will limit the ability of sportsbook operators to hit profitability. With these changes alone, it’s no surprise FUBO stock has fallen into the market’s graveyard.

But those are not the only issues affecting its performance since late 2020. Like with a lot of fast-growing companies out there, becoming profitable has been an issue. While revenue has skyrocketed, net losses haven’t narrowed. Instead, they’ve done the opposite.

There’s also increased concern that it’s “late to the game” rolling out its sports wagering platform. The other online sportsbook operators, along with established gaming companies like MGM Resorts (NYSE:MGM), have locked up much of this market. Adding these company-specific issues atop changes in the market, shares could continue to struggle.

Why It May Not Win the Game in Time

Investors bullish on FUBO stock may wave the issues listed above as things that are already priced into shares. In their view, if the company can grow in line with guidance this year, there may be enough to justify a move back to much higher prices.

With guidance calling for revenue of between $1.08 billion and $1.09 billion, or around 70% above 2021 revenue ($638 million), I can see why many see this happening. But it’s not set in stone that’s how it plays out. Especially as the chances of a recession continue to climb. Belt-tightening among consumers could impact its rate of revenue growth.

Yet whether or not its rate of growth meets expectations, FuboTV’s profitability issue will likely continue. Even as the sell-side projects the company will see strong revenue growth in the coming years, consensus calls for earnings per share (EPS) to remain negative through 2025.

Put simply, this issue with getting out of the red could hinder a possible recovery. With this, a partial comeback (yet still one that results in big gains for those buying today) may not arrive. Even if it does arrive, it does so well beyond a reasonable timeframe.

There’s Likely Plenty of Time to Place a Bet on FuboTV

Based on the prospect of continued losses through 2025, FuboTV doesn’t appear to be a great comeback play right now. But that’s not to say that will remain the case. A year or two from now, management could place more focus on profitability, rather than on maximizing revenue growth.

This may mean Fubo’s streaming and sports betting platforms become much smaller than expected. Yet if it results in the business becoming profitable? It would likely result in the company becoming worth far more than it is worth today.

In the meantime, as it could flounder, or head lower, in the short-term, there’s no rush to bottom-fish in FUBO stock. If bullish on its future, take your time.

On the date of publication, Thomas Niel 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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.


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