Live TV streaming platform fuboTV (NYSE:FUBO) was the victim of multiple short-seller attacks in December. Together, those attacks — which centered mostly around declining live TV viewership, a lack of differentiation in the fuboTV platform, and a broken business model — caused FUBO stock to plunge, from $60 to $20 in a matter of weeks.
But, in January, that bear thesis fell apart, and FUBO stock has started to bounce back.
Bears said fuboTV’s growth narrative would decelerate going forward. But management recently announced preliminary Q4 numbers that show the growth narrative is actually accelerating.
Bears said fuboTV would never construct a moat around live sports and sports betting. But the company just announced a major acquisition which will enable it to launch a sportsbook in 2021.
Bears said fuboTV would never hit the subscriber scale required to turn a profit. But with the growth narrative accelerating and sports betting dreams turning into a reality, it increasingly appears as though fuboTV will indeed become a very big platform with a ton of subscribers one day.
All in all, the unnecessarily short-sighted bear thesis on FUBO stock is falling apart. Instead, a new bull thesis — centered around fuboTV turning into the dominant live TV streaming platform for sports fans, at a time when everyone is pivoting to live TV streaming services — is emerging.
As this new bull thesis continues to emerge over the coming years, FUBO stock will keep powering higher.
Here’s a deeper look.
Not a “One Hit Wonder”
A big component of the bear thesis on FUBO stock was that the company’s blockbuster third-quarter results were not repeatable.
For context, one could very easily chalk up the beginning of the breakout in FUBO stock to the company’s blowout third-quarter earnings report in early November. In that quarter, the company reported an impressive 58% rise in paid subscribers as well as an even more impressive 71% surge in revenues. Investors were amazed by those growth rates, and rushed into FUBO stock at breakneck speeds.
Bears argued in December that those results were not repeatable, citing declining app download data among other factors as reasons why fuboTV’s blowout quarter would be prove to be a “one hit wonder.”
As it turns out, though, the opposite is true.
FuboTV just announced preliminary fourth-quarter numbers, and they are even better than those blowout third-quarter numbers. Paid subscriber growth in Q4 is expected to accelerate to 72%, from 58% in Q3. Meanwhile, revenue growth is expected to accelerate in Q4 to about 80%, from 71% in Q3.
In other words, fuboTV’s growth trajectory is accelerating — not decelerating — underscoring that the company’s miraculous Q3 earnings report was not a “one hit wonder,” but rather the beginning of a long-term ramp in the company’s growth narrative.
And that makes sense. The reality here is that people aren’t ditching live TV content. They’re ditching live TV distribution. They’re pivoting from linear live TV, to streaming live TV. fuboTV is at the epicenter of this enormous pivot, and is clearly doing enough to convince tens of thousands of consumers every month to signup for its platform.
This early leadership in a secular growth market bodes well for FUBO stock long-term, especially since the company is doing everything right to build a moat around live sports and sports betting.
Building the Sports Moat
Another big component of the bear thesis on FUBO stock was that fuboTV is nothing more than a commoditized offering in a very competitive market.
At the time, that was mostly true. But it won’t be true for much longer.
FuboTV acquired fantasy sports game tools developer Balto Sports in early December. A month later, fuboTV announced it will be acquiring sports betting and interactive gaming company Vigtory.
These strategic acquisitions give fuboTV the necessary technology assets and industry connections to push forward with constructing a competitive moat around live sports. That’s exactly what the company plans to do — and it will all come to life in 2021.
Management announced that they will be launching a free-to-play gaming experience this summer, as well as a sportsbook app before the end of the year. The end goal is to integrate this gaming experience and digital sportsbook into fuboTV’s live TV streaming platform, thereby creating a seamless, hyperconnected digital ecosystem surrounding sports viewing and betting.
In other words, the dream of fuboTV turning into the sports-focused live TV streaming platform of the future for sports fans and betters, is finally turning into a reality.
As it does, fuboTV’s growth narrative will continue to accelerate — especially as legislation continues to inch toward making online sports betting ubiquitously legal.
Scale to Drive Profits
The final big component of the bear thesis on FUBO stock was that fuboTV will never hit the subscriber scale required to run a profitable media business with big content acquisition costs.
This, too, appears increasingly unlikely.
FuboTV is already adding tens of thousands of new paid subscribers every month, without any gaming or sports betting integration. That number has also been trending higher throughout 2020.
With gaming and sports betting integration on their way in 2021, fuboTV’s subscriber growth pace will only accelerate over the next 12-plus months. By the end of the year, we will likely be looking at a platform that is adding 50,000-plus new subs every month.
That’s the sort of growth dynamic which strongly implies that fuboTV will become a 10 million-plus subscriber business one day. At that scale, the company will easily be able to run a profitable media business.
Bottom Line on FUBO Stock
The bears have a great argument against FUBO stock. But it goes awry on one thing: It focuses on what fuboTV is today, not what it will be tomorrow.
What fuboTV is today is a small, largely undifferentiated live TV streaming platform that lacks the scale required to be profitable in a high-cost business.
But, what fuboTV will be tomorrow is a large, differentiated all-in-one live TV streaming and sports betting ecosystem, with more than enough scale to produce sizable profits.
When investing, I like to focus on what will be, not what is — and that’s why I remain very bullish on FUBO stock.
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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