The past month has a been a tale of two cities for live TV streaming service provider fuboTV (NYSE:FUBO). First, it was the best of times, as FUBO stock rallied from $25 to $60 in the first half of December on a wave of Wall Street upgrades and growing enthusiasm for the Streaming TV Revolution. Then, it promptly turned into the worst of times, as FUBO stock gave back all those gains (and then some) amid a flurry of short-seller attacks and concerns about the streaming platform’s business model.
Who should you listen to? The bulls saying fuboTV is the next Netflix (NASDAQ:NFLX)? Or the bears saying FUBO stock is worth less than $10?
Although the bears have the momentum right now, the bulls will ultimately win this tug-of-war for two simple reasons.
Consumers love live TV, and they hate paying for cable.
This combination will spark a mass exodus of hundreds of millions of households globally from cable TV packages to live TV streaming services over the next decade. FuboTV is one of five major players in the live TV streaming space, and is constructing a moat to maintain a strong, defensible position in this industry. The platform has visibility to 10 million-plus subs over the next few years. Such scale will unlock positive operating leverage, which will turn today’s losses into tomorrow’s profits.
As go profits, so go stocks. FUBO stock will be no exception. Big profit growth over the next decade will power big gains in the FUBO stock price.
So, use this opportunity to take a deep breath, ignore the noise, look at the big picture, and buy the dip.
Long-term, FUBO stock is a winner worth owning.
FUBO Stock: The Bear Thesis
The bear thesis on FUBO stock breaks down into three big components:
- Live TV demand is falling, as evidenced by the growing number of cord cutters in the world.
- FuboTV is undifferentiated in terms of content, price, or technological capability, and is thus just a commoditized offering in a shrinking market.
- The business model of paying fixed prices for content requires enormous scale to unlock profits, and fuboTV will never reach that scale.
Ostensibly, such concerns seem valid. But, upon closer inspection, you’ll find that they are unnecessarily short-sighted.
Live TV Demand Shift
First, live TV demand is not falling by a significant amount.
Netflix as a streaming service has been around for a decade. It’s nearly ubiquitous in the U.S. today. Yet, despite Netflix being in every household in America today, most American households still pay for cable TV.
Why? If Netflix is fulfilling all of our entertainment desires, why are most Americans still shuffling out over $100 per month for cable?
Because Netflix isn’t fulfilling all of our entertainment desires. And it never will. Consumers love their live programming. They love their live news. They love their live sports. These are all things that cable TV provides, and which Netflix does not provide.
In other words, the staying power of cable TV even amid Netflix’s march to household ubiquity underscores the enduring strong demand for live TV.
To that end, the next decade won’t involve households cutting the cord and replacing cable TV with nothing. Instead, the next decade will involved hundreds of millions of households globally cutting the cord and replacing cable TV with live TV streaming services — since such streaming services are cheaper, easier to install, easier to maintain, and more convenient.
This is an enormous shift. fuboTV is at the epicenter of this shift. That’s great news for FUBO stock.
Creating a Moat Through Exclusive Sports Content
Second, while fuboTV is largely undifferentiated from YouTube TV and Sling today, it pays to remember that Netflix was undifferentiated from Amazon Video in its early days, too.
Then, Netflix acquired/created original content, created a moat, and leveraged that moat to differentiate itself from the pack. That differentiation attracted new subs to the platform, and created a super sticky user base that fell in love with the exclusive content.
FuboTV will do the same over the next few years, and it will produce similar results.
The company is already in talks to acquire exclusive programming rights to sports content, and management appears strategically focused on creating a sports-first streaming platform that is differentiated through exclusive sports content. As the company inches closer and closer towards that goal over the next few years, fuboTV will create a moat, and in turn leverage that moat to differentiate itself from YouTube TV and others.
This differentiation will turn fuboTV into the best live TV streaming service for sports fans, which will attract tons of sports fans to the platform and create an exceptionally sticky user-base.
It’s a tried-and-true winning recipe in the streaming TV industry. As fuboTV executes strongly against this strategy over the next few years, FUBO stock will climb higher.
Scale Will Unlock Profits
The third point here flows naturally from the first two points.
FuboTV is not a commoditized platform in a shrinking market. Rather, thanks to the seismic shift toward live TV streaming services and fuboTV’s strategic focus on acquiring exclusive sports content, this is an increasingly differentiated platform in a growing market.
As such, fuboTV is not some run-of-the-mill platform that will max out at a few million subs and never hit the scale required to leverage its high fixed-content costs.
It is a platform with super clear visibility to 10 million or more subs one day. That’s enough scale to drive significant leverage throughout the company’s operating model. With that leverage, fuboTV will follow in Netflix’s footsteps, and turn operating losses, into operating profits.
Along that journey, FUBO stock will be a winner, not a loser.
Bottom Line on FUBO Stock
When it comes to fuboTV stock, you have to ignore the noise.
I understand the noise can be painful. FUBO stock is down 40% over the past five days. But there was a point early on its Wall Street life when Netflix stock collapsed by more than 50%.
It happens. Growth stocks get knocked down. Wall Street is forever unnecessarily short-sighted and far too concerned about the day-to-day.
The key to successful investing is being able to look past that noise, and see the big picture. The big picture here is that everyone will inevitably pivot to live TV streaming services, and fuboTV is doing everything right to position itself as one of the major live TV streaming service providers by 2030.
Long-term, that’s a winning recipe for FUBO stock. Not a losing one.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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