$FUBO will beat on Q4 earnings

Fubo is a tv streaming platform similar to that of YoutubeTV and HuluTV. They have recently taken a beating after its recent earnings run and subsequent drop. This was due to an EPS miss largely because of massive sales and marketing spending to speed up subscription growth. In addition to eps miss, small cap stocks have also been beaten down the past couple of weeks dropping FUBO to a price of $21.50 at Fridays close. The current price presents a tremondous opportunity for short term and long term gains. CATALYSTS Fubo announced they've hit the 1 million subscription milestone during Q3 ER. This is hinting at a huge revenue boost in this Q4 period. For reference, for most of Q3, Fubo sat at around 600k subs. Fubo's ARPU has been rising by about $2 per earnings with a projected $76 ARPU for this Q4. Given 1 millions subs x 3 months for q4, thats 3 million subs x ARPU of $76 giving roughly $230 million vs their guided $200 mil. Margins will improve per subscription due to ad revenue. Fubo currently produces $8.50 ad revenue per subscription. This ad revenue chews directly into the business expenses and negative margin. Imagine 400k more subscriptions per month in q4 vs q3. That is roughly a $8-$10 million in ad revenue gained. This will help margins immensely. Take a look at my chart below to see how an increase in subscription improves margins. ​ Q4 projections are in red. Note difference in revenue and sub expenses as subscription rises. That is due to ad revenue. Fubo's path to profitibility is mainly volume on subscription. At their current ARPU, they'll need about 4 million subs to reach profitibility. They have been growing their subscription base very rapidly. Last year during Q2, they had just 250k subscribers. They gained more than that last quarter alone! There are still 71 million households that have yet to cut the cord. Huge market to tap. Of all the above, I didnt include Fubo's sports betting side of business. The company has recently went live in Iowa with many states to come. They plan to go live in 2 more states during Q1 of next year. The potential revenue would only improve Fubo's margins given the poor margins of streaming. Below, you can see the potential revenue a state as small as Iowa can bring per month. ​ Note: this was for the month of October when Fubo wasnt live yet. Those bets were likely tests. The average sportsbook took in millions in revenue for October alone. Fubo currently has $400 million cash on hand. Their net loss last quarter amounted to $100 million due to marketing. Their net losses should only continue to decrease with rising subscription base. They also have a $500 million shelf that theyve only tapped $70 million out of. I do not anticipate much dilution in the short term. Take a look at the chart below to see how expenses continue to drop percentage wise in relation to revenue. ​ Expenses continue to decrease with rising subs and ARPU! Challenges Fubo's main long term challenge is their ability to maintain and acquire sports content to remain a leader in sports streaming. They've just lost La Liga to ESPN+ and even were outbidded by NBC for the Premier League. Their competition just has deeper pockets in obtaining content. Fubo will have to deeply invest into interactivity and tech to retain customers along with retaining and acquiring sports content. All of which, are very expensive for a company already losing money. TL;DR: Fubo will smash q4 earnings with record $25 mil ad revenue. All of which will cutdown on net loss. Their roadmap to profitibility is subsription growth which is around 4 million concurrent subs to hit profit. They doubled from 500k to 1 millions+ subs in a year. There are 71 million househoulds yet to cut the cord. Their sports betting app will go live in a few more states in the coming months. Positions: only shares atm. Looking at February $25 calls for Q4 but waiting for better entry point.

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mhlor

Nov 21, 2021

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$FUBO will beat on Q4 earnings

bullish

Fubo is a tv streaming platform similar to that of YoutubeTV and HuluTV. They have recently taken a beating after its recent earnings run and subsequent drop. This was due to an EPS miss largely because of massive sales and marketing spending to speed up subscription growth. In addition to eps miss, small cap stocks have also been beaten down the past couple of weeks dropping FUBO to a price of $21.50 at Fridays close. The current price presents a tremondous opportunity for short term and long term gains.

CATALYSTS

Fubo announced they've hit the 1 million subscription milestone during Q3 ER. This is hinting at a huge revenue boost in this Q4 period. For reference, for most of Q3, Fubo sat at around 600k subs. Fubo's ARPU has been rising by about $2 per earnings with a projected $76 ARPU for this Q4. Given 1 millions subs x 3 months for q4, thats 3 million subs x ARPU of $76 giving roughly $230 million vs their guided $200 mil.

Margins will improve per subscription due to ad revenue. Fubo currently produces $8.50 ad revenue per subscription. This ad revenue chews directly into the business expenses and negative margin. Imagine 400k more subscriptions per month in q4 vs q3. That is roughly a $8-$10 million in ad revenue gained. This will help margins immensely. Take a look at my chart below to see how an increase in subscription improves margins.

Q4 projections are in red. Note difference in revenue and sub expenses as subscription rises. That is due to ad revenue.

Fubo's path to profitibility is mainly volume on subscription. At their current ARPU, they'll need about 4 million subs to reach profitibility. They have been growing their subscription base very rapidly. Last year during Q2, they had just 250k subscribers. They gained more than that last quarter alone! There are still 71 million households that have yet to cut the cord. Huge market to tap.

Of all the above, I didnt include Fubo's sports betting side of business. The company has recently went live in Iowa with many states to come. They plan to go live in 2 more states during Q1 of next year. The potential revenue would only improve Fubo's margins given the poor margins of streaming. Below, you can see the potential revenue a state as small as Iowa can bring per month.

Note: this was for the month of October when Fubo wasnt live yet. Those bets were likely tests. The average sportsbook took in millions in revenue for October alone.

Fubo currently has $400 million cash on hand. Their net loss last quarter amounted to $100 million due to marketing. Their net losses should only continue to decrease with rising subscription base. They also have a $500 million shelf that theyve only tapped $70 million out of. I do not anticipate much dilution in the short term. Take a look at the chart below to see how expenses continue to drop percentage wise in relation to revenue.

Expenses continue to decrease with rising subs and ARPU!

Challenges

Fubo's main long term challenge is their ability to maintain and acquire sports content to remain a leader in sports streaming. They've just lost La Liga to ESPN+ and even were outbidded by NBC for the Premier League. Their competition just has deeper pockets in obtaining content. Fubo will have to deeply invest into interactivity and tech to retain customers along with retaining and acquiring sports content. All of which, are very expensive for a company already losing money.

TL;DR: Fubo will smash q4 earnings with record $25 mil ad revenue. All of which will cutdown on net loss. Their roadmap to profitibility is subsription growth which is around 4 million concurrent subs to hit profit. They doubled from 500k to 1 millions+ subs in a year. There are 71 million househoulds yet to cut the cord. Their sports betting app will go live in a few more states in the coming months.

Positions: only shares atm. Looking at February $25 calls for Q4 but waiting for better entry point.

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read-time
3 min

25.00

Target Price

9/ 10

Confidence

1-2 Months

Timeframe
Share
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Earnings Release
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SEC Filing
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