Analyst Read: $FUBO Bull Case

A deep dive into FuboTV.
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I have noticed that fuboTV ($FUBO) has become a flashy name in today’s tech investing zeitgeist. fuboTV is a streaming TV service that focuses primarily on live sports, but also has news, network television series and movies. Think of it as a competitor to YouTube TV, Hulu Live, Sling TV, and AT&T TV.

It’s currently a very controversial stock with excitable bulls and adamant bears. Let’s look at the bull case that Beth Kindig wrote in Forbes. This is a summary of her opinion, not my own.

Q3 subscriber growth looks strong.

  • Subscription revenues were up 64% and advertising revenue was up 153% in Q3.
  • Average Revenue Per User (ARPU) was up 14% and total content hours streamed increased 83%. 

Beth sees no weakness in Q4 app download data. 

  • Short seller Kerrisdale Capital’s data shows a large decline in December, but according to Apptopia, fuboTV downloads are up in Q4 with only a small dip in December. 
  • Beth believes downloads will recover with the start of basketball and hockey season.

JO: As of this morning, it looks like Beth was right for Q4. fuboTV expects total revenue to be $94 to $98 million (77% to 84% growth) and paid subscribers to be higher than 545,000 (72% growth).

fuboTV is unprofitable but has laid out a path to monetization.

  • Adjusted contribution margin was positive 16% in Q3 2020.
  • fuboTV believes margins will expand over time by increasing advertising and add-on services like DVR storage and multiple device streaming.
  • Beth isn’t concerned about margins right now and more interested in how fuboTV has competed with the larger Multichannel Video Programming Distributors (MVPDs) on price.

Beth believes live sports are the “holy grail” of streaming and will allow fuboTV to monetize fantasy games and sports betting.

  • Live sports is the primary reason why customers have not cut the cord and has a loyal and fervent viewer base.
  • FuboTV has stated they will first go into free-to-play fantasy games and then move into sports betting.
  • Sell-side analysts believe sports betting could come as soon as fiscal 2021.

Beth believes, like Roku ($ROKU) in 2018, $FUBO has strong growth fundamentals and profitability will come later.

  • Beth believes the product is live sports, which is very important and the last hold out for would-be cord cutters.
  • fuboTV’s margins are pressured by the market and content, but she believes the same is true for Roku and Netflix.
  • Roku and FuboTV both have solid subscriber growth and high ARPU. If the audience continues to grow, fuboTV can find a new path of monetization in free-to-play fantasy and sports betting.
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