Most investors are so focused on this ticker’s risk that they’re not noticing the odds of a sizable reward.
To say fuboTV (FUBO 5.30%) has been a subpar performer lately would be a considerable understatement. Shares are down a whopping 98% from their late-2020 peak, and still within sight of multiyear lows reached in June. The stock’s bullish euphoria created by the COVID-19 pandemic clearly didn’t last. A lack of profits probably hasn’t helped matters either.
Still, if you can digest the risk and volatility this ticker brings to the table, there’s a four-legged bullish argument to be made for stepping into this stock sooner than later.
What’s fuboTV?
On the off-chance you’re reading this and aren’t aware, fuboTV is a streaming alternative to conventional cable television service like you might purchase from Spectrum or Xfinity. It offers the same (mostly) network broadcasts and cable programming you’d expect, but delivers it in the form of a digital stream.
Even among similar cable alternatives like Alphabet‘s YouTubeTV and Disney‘s Hulu+Live, however, fuboTV is something of a standout. It specializes in sports, providing easy access to all the major sports channel add-ons as well as some sporting events (like soccer matches played in overseas leagues) that aren’t otherwise available to U.S. fans.
And it works. Since launching as a narrowly focused sports streaming service in 2015 and slowly evolving into a full-blown cable alternative ever since, the company has now grown to 1.6 million subscribers to its cable-like service plus another 400,000 subscribers to its skinnier sports package offered overseas.
Data source: FuboTV. Chart by author. Figures are in thousands.
Last quarter’s top line reached a $386 million as well, pushing fuboTV ever closer to profitability.
FUBO Revenue (Quarterly) data by YCharts
Clearly not every investor sees or believes in this progress. And understandably so. The television business is changing, after all. Namely, even though it isn’t “cable TV,” fuboTV still faces the same basic headwind stemming from rising prices along with the rise of other streaming platforms like Netflix and Disney+.
Nevertheless, there’s arguably more still working for fuboTV than against it. Ditto for the stock.
Four reasons to buy fuboTV stock
So what makes this unprofitable laggard such a compelling pickup while it’s down so much from its peak price? Four key reasons, one of which has already been mentioned — its sports-oriented focus.
A recent survey performed by CableTV.com tells the tale, indicating that the top reason people still subscribe to cable (even when they don’t have to) is continued access live sports events.
Consumers’ willingness to pay sky-high cable prices for access to sports programming hasn’t exactly stopped the cord-cutting movement, for the record. But it may finally be slowing it down as a precursor to stagnation. If and when that happens, look for more and more cable customers to migrate to fuboTV’s sports-centric service.
We’re also seeing the streaming sliver of the cable TV market follow in the same basic footsteps its coaxial cable cohorts left behind as part of their rise and subsequent fall. That’s imposing price increases that simply push consumers too far. YouTubeTV, for instance, recently upped its monthly price by $10 to a base rate of $82.99 per month — more with any add-on channels. This service’s 8 million-plus subscribers now have a cost-minded choice to make. Alphabet’s decision follows a similar one Disney made for its Hulu+Live service around the middle of this year.
This isn’t to suggest fuboTV is immune to future price hikes. It’s certainly better shielded from forces that require them, though. Although it offers most of the programming you’ll find available via mainstream cable, it makes a point of not carrying some of the lesser-watched cable channels that would needlessly make its service more expensive to purchase.
Whatever fuboTV is or isn’t, it clearly works. The company continues to add net subscribers to its flagship service, and predicts more user growth for the three-month stretch ending this month. Even more than that, though, this ongoing revenue growth is moving the cable alternative closer to profitability. At its current pace of progress, fuboTV could be out of the red and into the black sometime by 2027.
Data source: StockAnalysis.com. Chart by author.
The market might reward at least some of this progress en route.
And this prospect brings the fourth key reason to buy fuboTV stock into focus. That is, fuboTV stock is just undervalued.
It’s admittedly difficult to determine an appropriate price for shares of a company that’s not only unprofitable, but won’t become profitable anytime soon. It’s not impossible to make reasonable guesses based on the information you do have, though.
To this end, the analyst community is willing to say that shares of this company as it stands right now are worth $2.38 apiece, or more than 70% above the stock’s present price. They may be keying in on the fact that the stock is only valued at a fraction of per-share revenue — revenue that’s likely to become profitable at some point in the foreseeable future.
If nothing else, these are qualities, characteristics, and numbers that an investor interested in diving into the streaming cable business might appreciate.
Keep it in perspective
FuboTV’s not a great fit for everyone’s portfolio, to be clear, and it’s certainly not a foundational type of holding for anyone’s portfolio. There’s above-average risk here, if only stemming from the uncertainty surrounding this company. Never even mind the fact that federal legislation to regulate fuboTV just like a conventional cable company has been proposed, which could raise its operating costs as a result.
As time marches on, though, it’s becoming clearer that fuboTV is as close to being the “skinnier,” a la carte, sports-minded cable bundle people want that the television industry can actually offer right now. The fact that the company has come out of nowhere to become competitive with powerhouses like Walt Disney and tech giant Alphabet says as much.
Bottom line? FuboTV certainly wouldn’t be a bad bet as a small sliver of a risk-tolerant growth investor’s portfolio.
