Fubo Stock Analysis

Company Description: FuboTV is a live TV streaming company focused primarily on sports which offers subscribers access to thousands of live sporting events, news, and entertainment content. The FuboTV platform allows users to have access to their content through streaming devices such as SmartTV's, mobile phones, computers, and tablets. This company gives the option to purchase additional features/packages that include more DVR cloud storage, number of simultaneous streams, international sports, adventure channels, etc. The base package provides a mixture of channels which includes the top 50 Nielson-ranked networks that span across sports, news, and entertainment. In the summer of 2020, they enhanced their sports offerings with the addition of ESPN and ABC as well as programming from Disney. In addition, FuboTV supports 4K streaming, although much of its content is streamed at 720p and 60 frames-per-second video quality. Since live TV requires a sophisticated technology infrastructure, Fubo utilizes industry standard digital Rights Management Technology and geographical rights requirements which enables them to meet blackouts if they were to occur. With all that content, FuboTV is one of the most expensive live tv packages that you can buy. Their competitors include the likes of YouTube TV ($64.99), Sling TV ($35.00), Hulu Live TV ($65), and more. Fubo's growth strategy is focused on acquiring new subscribers who are attracted to the sports and entertainment offerings that they provide. They monetize their subscriber base through subscription fees and digital advertising and in 2020 the majority of their revenue came from monthly subscriptions. Furthermore, in January of 2021 Fubo announced that they plan on acquiring sports betting and interactive gaming company Vigtory (see recent acquisition section) and they expect to launch a sportsbook before the end of the year. Total Addressable Market (TAM) Live TV streaming is changing the way people watch their favorite sports, shows, and other entertainment content. As a result, more people are deciding to stop paying for traditional TV. Due to this disruption, billions of dollars in subscription and advertising revenue has shifted to streaming platforms. The global video streaming market size was valued at $50.11 billion in 2020 and is expected to grow at a compounded annual growth rate of roughly 21% from 2021 to 2028. In addition to the streaming market which Fubo currently operates in, their commitment to providing sports betting has expanded their total addressable market. The global sports betting industry reached a market size of $203 billion in 2020 and is expected to grow by $144.4 billion from 2020-2024 (11% CAGR). What hinders the growth of this industry is the fact that sports betting is still illegal in many parts of the world. Sports betting is currently legal in a number of states in the US and in countries such as the UK, Denmark, Italy, China, and a few others. While sports betting is legal in a number of countries, often times people have limited access. For example, in Costa Rica you can only bet online and in India only a few states allow sports betting. If we add together the total addressable markets for live TV streaming and sports betting in the year of 2020 we get $253.11 billion. Compare that number to Fubo's revenue of $268.8 million in 2020 and we see that Fubo has a huge opportunity ahead of itself. As Fubo scales their new sports betting business and more countries and states make sports betting legal, we should see Fubo ramping up revenue growth significantly. Of course their is a risk to all this as it is very costly to scale both businesses that Fubo operates. Thus, their financial results will give us an idea of how they've been growing and if they can maintain the level of growth they've seen in the past. Full Year 2020 Financial Results 2020 Highlights Total revenue was up 83% YoY to $268.8 million U.S. GAAP as-reported revenue was $217.7 million Advertising revenue grew 133% YoY to $29.0 million Subscription revenue increased 73% YoY to $230.7 million Adjusted Contribution Margin was positive 10.1%, up from negative 3.1% in 2019 fuboTV reached 547,880 subscribers, up 73% YoY Notably in 2H 2020, fuboTV grew by 261,754 net subscriber additions Average Revenue Per User (ARPU) per month increased 17% YoY to $62.84 Annualized ARPU increased $109 to $754 Total content hours streamed grew 82% YoY to 544.9 million hours Customers streamed 7.2 hours per day, up 11.8% YoY Note - main points are bolded Important Points to Address Revenue was up 83% YoY as advertising revenue grew to $29 million (up 133% YoY) and subscription revenue increased 73% to $230.7 million. As we can see from the numbers, this company is growing at a fast clip. Although the revenue growth they reported is impressive, when looking at their balance sheet they still reported an operating loss of roughly $480 million which was a drastic increase from the prior year which came in at $39 million. Additionally, as this business has scaled they saw their operating expenses jump from $43 million in 2019 to $698 million in 2020 and their goodwill reach $478 million. What these numbers show me is that while this company is growing fast, much of that growth isn't necessarily organic. They spent $63 million on advertising in 2020, while only spending $491,000 in 2019. Also, their general and administrative expenses jumped from $13 million in 2019 to $78 million in 2020. While some investors may argue that this business is taking on significant costs short-term so they can succeed in the long-term, I'm worried that heavy competition will slow down their growth. One final thing to note about their expenses is that currently they're losing money on the subscription plans that they offer as their subscriptions revenue was $184 million for 2020, while their subscriber related expenses totaled $204 million. Fubo is up against some strong competitors such as Google with their YouTube TV platform, Sling, Roku, and other streaming services. In the future, we'll see how those expenses change in relation to their revenue as they scale their new sports gambling business. Fubo reported reaching 547,880 subscribers in 2020 which was a result of them growing their subscriber base by 261,754 subscribers. As they scaled their subscriber base, average revenue per paying user increased by 17% YoY to $62.84 and total content hours streamed grew 82% YoY to 544.9 million hours. These numbers are impressive as well, but I question how much of that growth was a result of the Covid lockdowns. 2021 is the important year we're going to have to pay attention to in order to get an idea of how this company operates in more 'normal' times. The final things I want to mention about Fubo's finances has to do with their current ratio and goodwill. Fubo reported current asset and liabilities of $156 and $227 million respectively, which puts their current ratio at 0.6. For any company to have a current ratio of 0.6 is worrisome in my eyes. Additionally, if you go a bit down their balance sheet you will notice that their goodwill is $478 million. Goodwill arises when one company purchases another. Goodwill is an intangible asset that is calculated by subtracting the fair market value of one company's liabilities from the amount the acquiring company pays for it. The amount of goodwill we're seeing with Fubo is quite high considering their total assets would drop by 50% if they didn't measure it. Recent Developments/Acquisitions In January of 2021, Fubo announced that they will be acquiring the sports betting and iGaming company Vigtory. The CEO David Gandler stated that, "We don't see wagering as simply an add-on product to fuboTV. Instead, we believe there is a real flywheel opportunity with streaming video content and interactivity." I agree with this move made by the CEO as betting is a great compliment to their sports-first TV streaming platform. Fubo's sportsbook is expected to be released sometime mid 2021 and they could see adoption in three states by the end of the year. It'll be interesting to see how this all plays out considering the heavy competition in the sports betting market. Some of the biggest names in the sports betting market include DraftKings Inc (DKNG), Penn National Gaming (PENN), Bragg Gaming Group (BRGGF), and more. In April of 2021, Fubo announced they were acquiring the exclusive live streaming rights to the South American Qatar World Cup 2022 Qualifying Matches. CEO David Gandler said, "By offering the best of South American soccer in advance of Qatar 2022, we are further differentiating FuboTV’s sports-first content portfolio enabling us to engage with more consumers than ever before.” Once again, I agree with the CEO and this move highlighted his dedication to making Fubo a sports streaming giant. This deal will help Fubo's brand name as this company will be advertising to millions of viewers. David is coming into the sports streaming market aggressively and investors will be awaiting to see how this acquisition will play out financially. In December of 2020, Fubo announced that they acquired Balto Sports. This deal marked Fubo's first move into the online wagering market. At the time the CEO was quoted saying, "We believe there are significant synergies between consumers who enjoy wagering and our subscribers who enjoy streaming live sports, creating a flywheel opportunity. As we’ve previously expressed, one of our goals with wagering is to expand our total available market (TAM) by developing another important revenue stream for fuboTV, as we are doing with our growing ad sales business." While I don't doubt the strong connection between sports wagering and Fubo's subscribers that enjoy streaming live sports, I question if the ad revenue investors are expecting will come to fruition. In April of 2020, Fubo announced the closing of their merger with the sports focused virtual entertainment company FaceBank Group. The CEO of Fubo had said, "With today’s closing, fuboTV is well-positioned to redefine the virtual MVPD space. Technology-driven cable TV replacement services are more important than ever, especially at this time when people are staying safe at home watching television for needed information, entertainment and escape.” FaceBank is quite an interesting company and developed some unique projects such as the virtual Michael Jackson show at the 2014 Billboard Music Awards. This deal not only marked an interesting point in the development of Fubo, but gave the company access to $100 million in funding in the form of a revolving line of credit. I wonder as to how Fubo will leverage the virtual reality and live-entertainment technology that they now control. Management CEO - David Gandler David was appointed as the CEO and director of Fubo in April 2020. He has been part of the team since 2015 when Fubo was simply a streaming soccer service. Prior to his role at Fubo, Gandler worked in the advertising industry for over 15 years at companies such as Scripps Networks Interactive, Time Warner Cable Media Sales, and NBCUniversal's Telemundo Media. David has won a number of awards which includes Goldman Sachs' 100 Most Intriguing Entrepreneurs (2019), Variety's Dealmakers (2020,2019), and Broadcasting & Cable's Power 100 (2017). David's vision for what Fubo could become is interesting and the first of its kind. Looking forward I hope to see Gandler scale this company and integrate their acquisitions successfully. Undoubtedly, David has a grand vision for what could become one of the largest sports betting and streaming companies. Co-Founder/CMO - Alberto Horihuela Alberto is the co-founder and chief marketing officer at FuboTV and is in charge of their branding, user engagement and retention, and overall marketing vision. Prior to his co-founding of FuboTV, Alberto was head of Latin America at DramaFever (a video streaming provider). Alberto has an entrepreneurial spirit as he also co-founded Primerad Network, a digital video advertising company that connected brand marketers to Latin American audiences. In addition to his experience in marketing and entrepreneurship, Horihuela worked as an economist and analyst at Morgan Stanley and DeMatteo Monness. Both Gandler and Horihuela have extensive experience in marketing, entrepreneurship, and media to which should serve this company well going forward. Management not mentioned: Simone Nardi (CFO), Mike Berkley (CPO), and Gina Sheldon (general counsel). What could go wrong Fubo can't keep up with the competition - As previously stated, Fubo is up against some heavy competition. AT&T TV provides more channels at the highest subscription level, but Fubo still offers more sports. Also , FuboTV's DVR only lets you record 250 hours of content while AT&T TV lets you record 500 hours of content. YouTube TV and Sling TV are two other competitors that are well equipped to steal market share from Fubo. The main differences I see between Fubo and the rest of the pact have to do with cost and product focus. Sling provides the cheapest plan which starts at $35 and is compatible with many of the existing streaming devices such as Apple TV, Xbox One, etc. In terms of the rest of the cohort, they all provide plans that are priced similarly. In terms of the products they offer, Sling, YouTube TV, and AT&T TV haven't differentiated themselves like Fubo. When it comes down to it, sports fans should gravitate to FuboTV as they provide the largest sports network. We'll have to see how this all plays out in the coming years to get to know which companies emerge as the leaders. Fubo fails to turn a profit - While this risk factor applies to any company that isn't profitable, it's important to highlight how early this company is to having a profitable business model. In their last earnings for the twelve months ended December 31st, Fubo posted $184 million of subscription revenue and $204 million in subscriber related expenses. Thus, this company is not making money on their services and I can't quite predict when or if this company will be profitable any time soon. That's not to say Fubo is a terrible service, but rather their financial standing isn't one that currently strikes me as sustainable. What we want to see in the future Contribution margin increasing - As noted in the fourth quarter and fiscal 2020 financial results, this company's contribution margin for 2020 was 10.1%. The contribution margin is the difference between subscriber revenue and what it costs Fubo to provide subscribers their service (ARPU - ACPU). While the contribution margin for this company sounds reasonable, the problem comes in when you factor expenses. Expenses such as sales and marketing, depreciation, technology and development, and a few others are hindering this company substantially from making a profit. Once you factor all the expenses of Fubo, they came in at an operating loss of $479 million. What we need to see from Fubo these next five years as they scale is them being able to at-least report a positive income from operations. Let's also remember that Fubo has a recurring revenue business model which means it is predictable and reliable. Fubo scales their sports gambling business - While this point is rather obvious, I wanted to note a few things about this side of Fubo's business so we can better understand it. Fubo has yet to roll out their sports betting business but they, "expect to launch a sportsbook before the end of the year." Certainly this is an exciting direction that this company is headed in. Although, we have no sort of guidance as to how this sports betting business will perform. CEO David Gandler was quoted saying, “We not only expect sports wagering to become a new line of business and source of revenue, but we also expect that it will increase user engagement on fuboTV resulting in higher ad monetization, better subscriber retention and reduced subscriber acquisition costs.” I like the way that David is thinking, but simply liking the idea doesn't make it a success. I can imagine investors will be eagerly watching how this venture performs in the first year of its integration. As for now, we don't really know what to expect. Analyst expectations Predicted revenue range for 2021: $465.03 – 480.44 million (growth of roughly 110%) Predicted earnings per share range for 2021 (EPS): $(2.5) – (0.82) Conclusion Fubo's vision to be a digital entertainment giant primarily focused on sports is innovative and unheard of. Their recent acquisitions of Vigtory and Balto Sports shows their commitment to making their goal a reality. While the CEO is thinking big, his ideas aren't translating well onto Fubo's financial statements. Their expenses have gone up at the same rate as their revenue has and that worries me. Additionally, this company isn't in the best cash position with $134 million. It's important to note that this company is still early in the process of what they're trying to accomplish and I'll be keeping a close eye on how they perform this next year. Their recurring revenue business model will surely serve them well in the future as it is predictable and reliable. You'll notice that the discounted cash flow is missing from this post and that is because forecasting this company's future growth is extremely difficult without some sort of idea as to what we can expect. As of right now, to put a price on this company is quite difficult. In conclusion, I'll be watching Fubo's earnings this next year to get an idea of where this company is headed and if it's worth starting a position.

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TedInvests

Apr 23, 2021
· POSITION CLOSED

22.57%

Position Return %

21.07

Price When Posted

4.75

Position Return

FUBO

fuboTV Inc

28.28

0.00
0.00%
Current Price

Fubo Stock Analysis

bullish

Company Description:

FuboTV is a live TV streaming company focused primarily on sports which offers subscribers access to thousands of live sporting events, news, and entertainment content. The FuboTV platform allows users to have access to their content through streaming devices such as SmartTV's, mobile phones, computers, and tablets. This company gives the option to purchase additional features/packages that include more DVR cloud storage, number of simultaneous streams, international sports, adventure channels, etc. The base package provides a mixture of channels which includes the top 50 Nielson-ranked networks that span across sports, news, and entertainment. In the summer of 2020, they enhanced their sports offerings with the addition of ESPN and ABC as well as programming from Disney. In addition, FuboTV supports 4K streaming, although much of its content is streamed at 720p and 60 frames-per-second video quality. Since live TV requires a sophisticated technology infrastructure, Fubo utilizes industry standard digital Rights Management Technology and geographical rights requirements which enables them to meet blackouts if they were to occur. With all that content, FuboTV is one of the most expensive live tv packages that you can buy. Their competitors include the likes of YouTube TV ($64.99), Sling TV ($35.00), Hulu Live TV ($65), and more. Fubo's growth strategy is focused on acquiring new subscribers who are attracted to the sports and entertainment offerings that they provide. They monetize their subscriber base through subscription fees and digital advertising and in 2020 the majority of their revenue came from monthly subscriptions. Furthermore, in January of 2021 Fubo announced that they plan on acquiring sports betting and interactive gaming company Vigtory (see recent acquisition section) and they expect to launch a sportsbook before the end of the year.

Total Addressable Market (TAM)

Live TV streaming is changing the way people watch their favorite sports, shows, and other entertainment content. As a result, more people are deciding to stop paying for traditional TV. Due to this disruption, billions of dollars in subscription and advertising revenue has shifted to streaming platforms. The global video streaming market size was valued at $50.11 billion in 2020 and is expected to grow at a compounded annual growth rate of roughly 21% from 2021 to 2028. In addition to the streaming market which Fubo currently operates in, their commitment to providing sports betting has expanded their total addressable market. The global sports betting industry reached a market size of $203 billion in 2020 and is expected to grow by $144.4 billion from 2020-2024 (11% CAGR). What hinders the growth of this industry is the fact that sports betting is still illegal in many parts of the world. Sports betting is currently legal in a number of states in the US and in countries such as the UK, Denmark, Italy, China, and a few others. While sports betting is legal in a number of countries, often times people have limited access. For example, in Costa Rica you can only bet online and in India only a few states allow sports betting.

If we add together the total addressable markets for live TV streaming and sports betting in the year of 2020 we get $253.11 billion. Compare that number to Fubo's revenue of $268.8 million in 2020 and we see that Fubo has a huge opportunity ahead of itself. As Fubo scales their new sports betting business and more countries and states make sports betting legal, we should see Fubo ramping up revenue growth significantly. Of course their is a risk to all this as it is very costly to scale both businesses that Fubo operates. Thus, their financial results will give us an idea of how they've been growing and if they can maintain the level of growth they've seen in the past.

Full Year 2020 Financial Results

2020 Highlights

  • Total revenue was up 83% YoY to $268.8 million
  • U.S. GAAP as-reported revenue was $217.7 million
  • Advertising revenue grew 133% YoY to $29.0 million
  • Subscription revenue increased 73% YoY to $230.7 million
  • Adjusted Contribution Margin was positive 10.1%, up from negative 3.1% in 2019
  • fuboTV reached 547,880 subscribers, up 73% YoY
  • Notably in 2H 2020, fuboTV grew by 261,754 net subscriber additions
  • Average Revenue Per User (ARPU) per month increased 17% YoY to $62.84
  • Annualized ARPU increased $109 to $754
  • Total content hours streamed grew 82% YoY to 544.9 million hours
  • Customers streamed 7.2 hours per day, up 11.8% YoY

Note - main points are bolded

Important Points to Address

  • Revenue was up 83% YoY as advertising revenue grew to $29 million (up 133% YoY) and subscription revenue increased 73% to $230.7 million. As we can see from the numbers, this company is growing at a fast clip. Although the revenue growth they reported is impressive, when looking at their balance sheet they still reported an operating loss of roughly $480 million which was a drastic increase from the prior year which came in at $39 million. Additionally, as this business has scaled they saw their operating expenses jump from $43 million in 2019 to $698 million in 2020 and their goodwill reach $478 million. What these numbers show me is that while this company is growing fast, much of that growth isn't necessarily organic. They spent $63 million on advertising in 2020, while only spending $491,000 in 2019. Also, their general and administrative expenses jumped from $13 million in 2019 to $78 million in 2020. While some investors may argue that this business is taking on significant costs short-term so they can succeed in the long-term, I'm worried that heavy competition will slow down their growth. One final thing to note about their expenses is that currently they're losing money on the subscription plans that they offer as their subscriptions revenue was $184 million for 2020, while their subscriber related expenses totaled $204 million. Fubo is up against some strong competitors such as Google with their YouTube TV platform, Sling, Roku, and other streaming services. In the future, we'll see how those expenses change in relation to their revenue as they scale their new sports gambling business.

  • Fubo reported reaching 547,880 subscribers in 2020 which was a result of them growing their subscriber base by 261,754 subscribers. As they scaled their subscriber base, average revenue per paying user increased by 17% YoY to $62.84 and total content hours streamed grew 82% YoY to 544.9 million hours. These numbers are impressive as well, but I question how much of that growth was a result of the Covid lockdowns. 2021 is the important year we're going to have to pay attention to in order to get an idea of how this company operates in more 'normal' times.

  • The final things I want to mention about Fubo's finances has to do with their current ratio and goodwill. Fubo reported current asset and liabilities of $156 and $227 million respectively, which puts their current ratio at 0.6. For any company to have a current ratio of 0.6 is worrisome in my eyes. Additionally, if you go a bit down their balance sheet you will notice that their goodwill is $478 million. Goodwill arises when one company purchases another. Goodwill is an intangible asset that is calculated by subtracting the fair market value of one company's liabilities from the amount the acquiring company pays for it. The amount of goodwill we're seeing with Fubo is quite high considering their total assets would drop by 50% if they didn't measure it.

Recent Developments/Acquisitions

  • In January of 2021, Fubo announced that they will be acquiring the sports betting and iGaming company Vigtory. The CEO David Gandler stated that, "We don't see wagering as simply an add-on product to fuboTV. Instead, we believe there is a real flywheel opportunity with streaming video content and interactivity." I agree with this move made by the CEO as betting is a great compliment to their sports-first TV streaming platform. Fubo's sportsbook is expected to be released sometime mid 2021 and they could see adoption in three states by the end of the year. It'll be interesting to see how this all plays out considering the heavy competition in the sports betting market. Some of the biggest names in the sports betting market include DraftKings Inc (DKNG), Penn National Gaming (PENN), Bragg Gaming Group (BRGGF), and more.

  • In April of 2021, Fubo announced they were acquiring the exclusive live streaming rights to the South American Qatar World Cup 2022 Qualifying Matches. CEO David Gandler said, "By offering the best of South American soccer in advance of Qatar 2022, we are further differentiating FuboTV’s sports-first content portfolio enabling us to engage with more consumers than ever before.” Once again, I agree with the CEO and this move highlighted his dedication to making Fubo a sports streaming giant. This deal will help Fubo's brand name as this company will be advertising to millions of viewers. David is coming into the sports streaming market aggressively and investors will be awaiting to see how this acquisition will play out financially.

  • In December of 2020, Fubo announced that they acquired Balto Sports. This deal marked Fubo's first move into the online wagering market. At the time the CEO was quoted saying, "We believe there are significant synergies between consumers who enjoy wagering and our subscribers who enjoy streaming live sports, creating a flywheel opportunity. As we’ve previously expressed, one of our goals with wagering is to expand our total available market (TAM) by developing another important revenue stream for fuboTV, as we are doing with our growing ad sales business." While I don't doubt the strong connection between sports wagering and Fubo's subscribers that enjoy streaming live sports, I question if the ad revenue investors are expecting will come to fruition.

  • In April of 2020, Fubo announced the closing of their merger with the sports focused virtual entertainment company FaceBank Group. The CEO of Fubo had said, "With today’s closing, fuboTV is well-positioned to redefine the virtual MVPD space. Technology-driven cable TV replacement services are more important than ever, especially at this time when people are staying safe at home watching television for needed information, entertainment and escape.” FaceBank is quite an interesting company and developed some unique projects such as the virtual Michael Jackson show at the 2014 Billboard Music Awards. This deal not only marked an interesting point in the development of Fubo, but gave the company access to $100 million in funding in the form of a revolving line of credit. I wonder as to how Fubo will leverage the virtual reality and live-entertainment technology that they now control.

Management

CEO - David Gandler

David was appointed as the CEO and director of Fubo in April 2020. He has been part of the team since 2015 when Fubo was simply a streaming soccer service. Prior to his role at Fubo, Gandler worked in the advertising industry for over 15 years at companies such as Scripps Networks Interactive, Time Warner Cable Media Sales, and NBCUniversal's Telemundo Media. David has won a number of awards which includes Goldman Sachs' 100 Most Intriguing Entrepreneurs (2019), Variety's Dealmakers (2020,2019), and Broadcasting & Cable's Power 100 (2017). David's vision for what Fubo could become is interesting and the first of its kind. Looking forward I hope to see Gandler scale this company and integrate their acquisitions successfully. Undoubtedly, David has a grand vision for what could become one of the largest sports betting and streaming companies.

Co-Founder/CMO - Alberto Horihuela

Alberto is the co-founder and chief marketing officer at FuboTV and is in charge of their branding, user engagement and retention, and overall marketing vision. Prior to his co-founding of FuboTV, Alberto was head of Latin America at DramaFever (a video streaming provider). Alberto has an entrepreneurial spirit as he also co-founded Primerad Network, a digital video advertising company that connected brand marketers to Latin American audiences. In addition to his experience in marketing and entrepreneurship, Horihuela worked as an economist and analyst at Morgan Stanley and DeMatteo Monness. Both Gandler and Horihuela have extensive experience in marketing, entrepreneurship, and media to which should serve this company well going forward.

Management not mentioned: Simone Nardi (CFO), Mike Berkley (CPO), and Gina Sheldon (general counsel).

What could go wrong

Fubo can't keep up with the competition - As previously stated, Fubo is up against some heavy competition. AT&T TV provides more channels at the highest subscription level, but Fubo still offers more sports. Also , FuboTV's DVR only lets you record 250 hours of content while AT&T TV lets you record 500 hours of content. YouTube TV and Sling TV are two other competitors that are well equipped to steal market share from Fubo. The main differences I see between Fubo and the rest of the pact have to do with cost and product focus. Sling provides the cheapest plan which starts at $35 and is compatible with many of the existing streaming devices such as Apple TV, Xbox One, etc. In terms of the rest of the cohort, they all provide plans that are priced similarly. In terms of the products they offer, Sling, YouTube TV, and AT&T TV haven't differentiated themselves like Fubo. When it comes down to it, sports fans should gravitate to FuboTV as they provide the largest sports network. We'll have to see how this all plays out in the coming years to get to know which companies emerge as the leaders.

Fubo fails to turn a profit - While this risk factor applies to any company that isn't profitable, it's important to highlight how early this company is to having a profitable business model. In their last earnings for the twelve months ended December 31st, Fubo posted $184 million of subscription revenue and $204 million in subscriber related expenses. Thus, this company is not making money on their services and I can't quite predict when or if this company will be profitable any time soon. That's not to say Fubo is a terrible service, but rather their financial standing isn't one that currently strikes me as sustainable.

What we want to see in the future

Contribution margin increasing - As noted in the fourth quarter and fiscal 2020 financial results, this company's contribution margin for 2020 was 10.1%. The contribution margin is the difference between subscriber revenue and what it costs Fubo to provide subscribers their service (ARPU - ACPU). While the contribution margin for this company sounds reasonable, the problem comes in when you factor expenses. Expenses such as sales and marketing, depreciation, technology and development, and a few others are hindering this company substantially from making a profit. Once you factor all the expenses of Fubo, they came in at an operating loss of $479 million. What we need to see from Fubo these next five years as they scale is them being able to at-least report a positive income from operations. Let's also remember that Fubo has a recurring revenue business model which means it is predictable and reliable.

Fubo scales their sports gambling business - While this point is rather obvious, I wanted to note a few things about this side of Fubo's business so we can better understand it. Fubo has yet to roll out their sports betting business but they, "expect to launch a sportsbook before the end of the year." Certainly this is an exciting direction that this company is headed in. Although, we have no sort of guidance as to how this sports betting business will perform. CEO David Gandler was quoted saying, “We not only expect sports wagering to become a new line of business and source of revenue, but we also expect that it will increase user engagement on fuboTV resulting in higher ad monetization, better subscriber retention and reduced subscriber acquisition costs.” I like the way that David is thinking, but simply liking the idea doesn't make it a success. I can imagine investors will be eagerly watching how this venture performs in the first year of its integration. As for now, we don't really know what to expect.

Analyst expectations

  1. Predicted revenue range for 2021: $465.03 – 480.44 million (growth of roughly 110%)
  2. Predicted earnings per share range for 2021 (EPS): $(2.5) – (0.82)

Conclusion

Fubo's vision to be a digital entertainment giant primarily focused on sports is innovative and unheard of. Their recent acquisitions of Vigtory and Balto Sports shows their commitment to making their goal a reality. While the CEO is thinking big, his ideas aren't translating well onto Fubo's financial statements. Their expenses have gone up at the same rate as their revenue has and that worries me. Additionally, this company isn't in the best cash position with $134 million. It's important to note that this company is still early in the process of what they're trying to accomplish and I'll be keeping a close eye on how they perform this next year. Their recurring revenue business model will surely serve them well in the future as it is predictable and reliable. You'll notice that the discounted cash flow is missing from this post and that is because forecasting this company's future growth is extremely difficult without some sort of idea as to what we can expect. As of right now, to put a price on this company is quite difficult. In conclusion, I'll be watching Fubo's earnings this next year to get an idea of where this company is headed and if it's worth starting a position.

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12 min

24.09

Target Price

6/ 10

Confidence

6-12 Months

Timeframe
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