Sports Streaming, iGaming Prospects Make FUBO Stock a Solid ‘Bet’
Ever since shares of fuboTV (NYSE:FUBO) peaked in the $50 range in early 2021, the stock lost its footing. FUBO stock is fighting to find support at key moving averages on the chart. Short-sellers are circling the stock with a 20% short interest.
The bears are ignoring several positive catalysts that may lift the stock back to previous highs. A key catalyst is sports betting.
Fubo Gaming and The Cordish Companies announced a market access agreement in Pennsylvania. It will pave the way for Mobile Fubo Sportsbook. Rob Norton, Cordish Gaming’s president, noted, “Philadelphia and Pittsburgh are both iconic sports cities that are deserving of best-in-class sports betting platforms.”
Fubo Gaming is a subsidiary of the fuboTV streaming platform. The firms will provide state-wide mobile access for iGaming and sports betting. Announced on July 15, the launch is subject to regulatory approvals.
fuboTV differentiates itself from other sports betting platforms by offering low latency. At a Technology and Media conference, co-Founder, CEO and director David Gandler said that latency is most important for algorithmic betting. He said, “we could stop bets like if you have a penalty shot or fellow shot, 30 seconds away, I think we can stop bets there.” So, its platform is ready for per-second betting opportunities. For now, its priority is improving user engagement over time.
FuboTV’s overall rating is very low compared to its peers, as shown below. Furthermore, its growth rating score trails its competitors.
Due to the weak quant stock scores (left), cautious investors should not buy the stock on the dip. The stock needs to post at least two consecutive quarters of results beating guidance.
In the first quarter, fuboTV delivered better-than-expected subscriber growth. Subscribers topped 590,430, up 105% Y/Y. Revenue rose by 135% Y/Y to $119.7 million. Q1 is a milestone for the company. It achieved sequential subscriber and revenue growth. CEO Gandler said that its customers are choosing fuboTV for its content offerings. He also said, “We see this trend continuing to accelerate as more consumers discover they can cut the cord without losing access to the sports teams, live channels, and content they love.”
fuboTV forecast second-quarter revenue as high as $122 million. Analysts have a consensus earnings estimate of a 48-cent loss (per TipRanks). The loss is typical for a streaming services firm in the early phases of growth. Analysts have a ~ $39 price target on the stock.
For full-year 2021, revenue will be in the range of $520 million to $530 million.
Management may raise its quarterly guidance when it reports results next month. Streaming is a greater part of people’s lives. For example, Roku’s (NASDAQ:ROKU) streaming platform is benefiting from an increase in active accounts and streaming hours.
Fubo will take 5.5% to 5.8% of the virtual multichannel video programming distributor market. Gandler said its viewers come for sports and stay for entertainment. For now, it is the only one carrying sports in 4K. By creating multi-view and Free-to-Play predictive soccer games, streamers have more reasons to stay longer.
The sports streaming market is a seasonal business. For example, the National Football League season will cause fluctuations in costs. Still, the company will aim to keep acquisition costs at 1x-1.5x the average revenue per user.
fuboTV has strong pricing power, which will offset variability in costs. When it launched its service, it charged $6.99. Since then, it has raised prices 10 times. It invested the cash flow back to the business to grow. Investors should monitor its key performance indicators in that time.
The online sports streaming and game betting market is a big opportunity. The markets rewarded Roku’s subscription growth by bidding shares higher. Conversely, the iGaming market is in the early phases, with fuboTV vying for market share. Investors who want exposure to both growing segments may consider buying fuboTV shares.
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.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get original insight that helps improve investment returns.