Tuesday was a bad beat of sorts for bullish investors on Wall Street. And streaming sports play FuboTV (NYSE:FUBO) got hit harder than most. But a buy, rather than throwing in the towel in FUBO stock may make sense for growth stock allocation within investors’ portfolios.
Consumer confidence or rather a huge lack thereof and a nine-year low in consumer expectations data on the back of soaring inflation and interest rates acted as a one-two punch for the market with the major averages shedding roughly 1.5% to 3% to finish the session.
And far from resistant to action which took growth stock heavyweights Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA), Nvidia (NASDAQ:NVDA) and others down by 5% and more, FUBO stock’s drop of 7.45% was fairly predictable for a company whose shares have proven more chump than champ over the past year.
Still and unless a recession favors a return of black and white TV’s with rabbit ears, let’s explain why and how a buy in FUBO is a good bet for bullish speculators.
FUBO Stock Bull & Bear Highlight Reel
Since reporting massive sales growth of around 100%, record Q1 revenues of $236.7 million, and a hefty 81% increase in paid subscribers which surpassed a milestone one million paying customers, bears haven’t let go of FUBO stock. Bears? Not Bulls? Yup.
Shares dropped a bit more than 20% in the report’s wake and nearly two months later FUBO stock is down another 17% and pennies from an all-time-low.
Not that the selling pressure has been without cause. In today’s macro environment and amid larger losses that doubled to nearly $141 million and ballooning negative cash flow of $126.6 million, investor worry of the company surviving trumps FUBO’s growth narrative.
Rightfully, FuboTV does need to address challenges such as rising content costs that as of last quarter outflanked sales growth. Without changing that relationship at some point the outfit could face bankruptcy if coffers are depleted.
Bears also contend that hiking subscriber prices or FuboTV’s higher margin, sports betting ambitions which faces competition from MGM (NYSE:MGM) or DraftKings (NASDAQ:DKNG) and still needs to clear a good deal more of regulatory red tape for state sportsbook approvals, may not rescue FUBO from ruin either.
FUBO Stock Bulls Can Win a Nail-Biter
Source: Charts by TradingView
While it might sound like a game over situation, appreciably there’s a lot of speculating on “the under” in FUBO stock based on what could, not will happen. And an environment where upbeat talk of “Dow 50K” has been replaced by stuffing groceries under the mattress makes it possible.
But don’t take your eye off the ball. The long game of growth and profits, remain possible for FuboTV.
For one, FuboTV’s Sportsbook appears to hold an advantage over the competition given its sticky live streaming sports platform. Also and unlike its competitors, FuboTV doesn’t need to rely on expensive ads to reach gaming customers. They’re already FUBO subscribers.
FUBO also announced it finished the quarter with $456 million in cash. It’s a sufficient bank roll to take the outfit through 2023. And looking out just a bit further, management is upbeat it can achieve positive cash flow and adjusted EBITDA in 2025.
Buying FUBO Stock
FUBO stock is obviously not the perfect investment. In fact, it could turn into a 100% rip-up bet. But for investors with room in their portfolio for a smaller growth company that’s proving itself a market leader, a buy could work its way into a multi-bagger over the next couple to few years.
Today’s favored approach for FUBO bulls is for investors to decide on a proper allocation of funds, cut that in half or by two-thirds, then locate a slightly out-of-the-money longer-term bull call spread, rather than buying shares.
The idea is to leverage realistic upside. If shares don’t cooperate, investors have reduced downside exposure. Then and if conditions dictate down the road, some of that unallocated capital can allow a second or third attempt at locating a profitable stay in FUBO.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.