- FuboTV (FUBO) shares cratered to below $3, well off its $35.10 high
- The company posted a damaging 69 cent quarterly EPS loss
- Investors may still bet on a rebound despite heavy short-selling levels
After Nasdaq’s steep correction became a near-bear market this year, investors holding FuboTV (NYSE:FUBO) stock should have worried. The company’s pivot into sports betting weakness ahead for its sports service core business.
In addition, streaming television is in a severe downtrend. Markets anticipate viewership growth will slow after the stay-at-home trend shifts to going outside. FUBO stock faces tremendous pressure.
Under weak stock market conditions, investors want to see more than strong revenue growth. They want FuboTV to start posting profits sooner. How should investors interpret FuboTV’s quarterly results?
FuboTV Loses 69 Cents a Share
In first-quarter 2022, FUBO stock posted a record revenue of $236.7 million, up by 98% year-over-year. Advertising revenue rose by 81% YOY to $22.8 million. Total paid subscribers grew by 81% YOY to 1.056 million. The firm detailed expectations for its Rest of the World business, which included France and Spain. It reported 305,000 total paid subscribers and $5.5 million in revenue.
Co-founder and Chief Executive Officer David Gandler highlighted the growth. He also cited some pressures in the period. Still, it ended the quarter with over $456 million in cash. It targets positive cash flow and adjusted EBITDA in 2025. Looking deeper, FuboTV’s advertising is a bright spot in the last quarter.
Strong Advertising Results
Chief Financial Officer & Principal Accounting Officer John Janedis said that fuboTV reported good advertising margins due to five notable renewals. As its content costs improve throughout the next six to 12 months and beyond, margins will also benefit. In addition, it will start seeing benefits as its subscriber base of over one million. The company has a better negotiating position with its strong audience count.
FuboTV is adding staff to its sales team. It already added three sales resources in the last quarter. It expects to report the benefits in the back half of the year. On the technology side, it is launching a bidding solution towards the end of the second quarter. CEO Gandler expects that component should contribute between 15% and 20% upside in its marketing efficiency (as measured by Cost per Thousand or CPM).
Product Refresh Will Short-Squeeze Bears
FuboTV is working on products that will raise its average revenue per user. As it continues developing product features, its platform will benefit. For example, it is sourcing programming from different media companies. This allows it to create a very personalized experience for users. Customer satisfaction will rise, increasing FuboTV’s ARPU.
Stock markets are discounting the value of FuboTV’s sports platform. Users will stay for its entertainment. In addition, the company is offering content differentiation in the sports space. As CEO Gandler mentioned, the variety will set it apart from general entertainment platforms like Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube and Dish Network’s (NASDAQ:DISH) Sling.
The bears need to watch out. Product updates will increase operating profits and help FuboTV’s stock price.
Should You Buy FuboTV?
Markets dumped FuboTV stock to book losses. The price-to-sales ratio is around 1.3 times. The company has enough cash on hand to cover operating costs.
More importantly, it continues to innovate its products. It will keep adding more users, converting them to paying subscribers.
FuboTV stock looks like a compelling buy at these levels.
On the date of publication, Chris Lau 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.