Even as a Heavy Underdog, FuboTV Stock Is a Questionable Wager

Stock Market
  • Already at penny stock levels, following its latest earnings release, FuboTV (FUBO) has hit new lows.
  • Its comeback potential may be limited, given its challenges.
  • You may be better off wagering on a sports betting pure play rather than on this risky sports streaming/wagering stock.
Source: Burdun Iliya / Shutterstock.com

As I discussed last month, external factors have played a big role in FuboTV’s (NYSE:FUBO) big stock price decline since late 2020. But when it comes to the latest drop for FUBO stock, company-specific factors are to blame.

That is, the market reacted negatively to its latest earnings report. Revenue growth did come in line with expectations. However, with wider-than-expected losses and disappointing guidance, investors saw it as a reason to bid down this sports streaming/wagering play to new lows.

Now deep into penny stock territory, you may think it’s a long-shot wager worth making. After all, even a slight improvement could result in a big move higher, right? Yes and no. In theory, things could improve in the quarter ahead. Still, the situation is more likely to either not change, or get worse from here.

FUBO fuboTV Inc. $3.22

FUBO Stock and its Latest Earnings Report

On May 5, FuboTV released its numbers for the March quarter. In terms of its top line, you can say the company met expectations. Revenue of $242 million for the quarter, up 102% year-over-year, was in-line with sell-side consensus. Subscriber growth was also strong for the quarter, with the company’s U.S. streaming platform reporting an 81% increase in the number of subscribers.

Unfortunately, these were the few bright spots in what was otherwise a disappointing report for FUBO stock investors. For the quarter, the company reported a net loss of $140.8 million, just over double the $70.2 million loss reported in the first quarter of 2021.

Not only that, but guidance was underwhelming. Walking back the revenue guidance figures from last quarter, instead of expecting to generate revenue of between $1.08 billion and $1.09 billion this year, it now expects to generate between $1.02 billion and $1.03 billion in revenue in 2022. The company has also trimmed back its subscriber estimate for 2022.

Post-earnings, the stock fell from $4.50 per share to briefly below $3 per share. Yet, while it has stabilized, don’t assume a bottoming-out, much less a recovery, is in motion.

Challenges Will Likely Continue

Again, considering it has gone from over $60 per share less than eighteen months ago to low single-digits today, it may seem like it’s all uphill from here with FUBO stock. With around $450.9 million in cash on hand, it has plenty in the tank to ride out further losses.

Revenue growth could remain high, as it keeps scaling up its streaming service and rolls out its sports wagering operation. In turn, this could get it out of the red and to consistent profitability. However, even if revenue growth remains strong, swinging from net losses to net profits is likely years away.

At least, that’s the take from analyst earnings estimates. Per the Wall Street Journal, the sell-side’s forecast calls for earnings per share (EPS) losses this year and in 2023 that are in line with losses reported for 2021. There’s an expected narrowing of losses in 2024, but not by much. Put simply, best case scenario, profitability challenges will remain.

Alongside this, revenue growth challenges could start to emerge. As evident from top-line estimates, revenue growth is decelerating. This deceleration could grow more severe, as an economic slowdown may limit the public’s appetite to subscribe to yet another streaming service.

Go With Other Sports Betting Plays Instead of FuboTV

While for now it’s mainly a streaming company, FuboTV’s sports betting angle was a big factor in its appeal during its hot stock days. You may still be bullish that its nascent sports wagering operation Fubo Sportsbook could help save the day.

But while it’s gaining market access in more U.S. states and can offer the combination of sports wagering and viewing through its platform, it may be too late to the game to capture a large share of the U.S. sports gambling market. Names like DraftKings (NASDAQ:DKNG) and MGM Resorts (NYSE:MGM) continue to have the edge.

Speaking of which, names like these have also been knocked lower in recent months. Instead of taking a chance with FUBO stock, you may want to place a bet on one of the other sports betting plays. Some of them may offer a better risk/return proposition.

On the date of publication, Thomas Niel 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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

Articles You May Like

COIN Stock Probably Still Hasn’t Found Its Ultimate Bottom
SoFi Technologies Stock Looks Better Than a Year Ago, but That’s Not Saying a Lot
4 Energy Stocks With Dividends to Add to Your Buy List
7 Stocks to Own Until 2032 and Beyond
BTC022: Dr. Adam Back & Bitcoin’s Proof of Work