This article was originally published here February 24.
fuboTV (FUBO) reported fourth quarter 2021 results that were surprisingly strong. Especially considering how badly the stock has been hit over the last 3 months.
Before going any further, please keep two things in mind:
- The markets have been in free fall of late. There are many concerns about macro factors.
- Many fuboTV peers are also hit hard with their rating. But none of them are growing as fast as fuboTV, as you will see.
- The market has a habit of causing you the most doubts at the worst possible time. Do not doubt yourself. Stay the course. Stay focused.
fuboTV is now offered at a very low price.
Additionally, its subscriber base is expected to grow by more than 40% over the coming year, and it will end up in 2022 with just under 2 million subscribers. This is clear proof that regardless of what the stock price tells you, followers love the platform. And households are willing to pay for it.
fuboTV’s revenue is expected to increase by 70% per year, not including betting revenue. Realistically, fuboTV will have no betting revenue this year.
fuboTV Revenue growth rates remain high
As you can see above, the forecast for the coming year is once again impressive. fuboTV will now bring in over $1 billion in revenue this year.
This is a very significant milestone, and for fuboTV to grow to 70% CAGR to reach this figure is no small feat.
In addition, for now, betting income is not taken into account in its forecast. This all comes solely from subscriptions and ad revenue.
Obviously, subscriptions have low profit margins. However, the key was the advertising margins, which are very attractive. But I’m moving forward.
fuboTV is a sports streaming platform. fuboTV is trying to position itself as the leading sports streaming platform.
It charges subscribers around $65 per month for access to its streaming sports. However, getting the license to stream sports is notoriously expensive.
The alternative is where households pay upwards of $80 per month for their cable. But with more and more households cutting cable, fuboTV presents itself as a serious contender for the leading sports streaming platform.
As a result, fuboTV not only charges a subscription to its customers, but fuboTV also shows viewers advertising.
These advertisements are highly targeted to the audience.
- Firstly, fuboTV holds credit card details and their home addresses along with other important first party household data.
- Second, it’s a very targeted niche demographic of adult males, most often professionals, with enough disposable income (obviously, since they pay monthly for access to the platform with a credit card).
This is exactly what advertisers are looking for. Targeted niche viewers, where they can target the audience they want whenever they want. Additionally, through fuboTV’s platform, advertisers get content recognition data.
This means that advertisers know who is watching which ad. This is extremely valuable data for advertisers.
Moreover, according to Nielsen data, fuboTV topped the streaming market by growing 2.75x in the fourth quarter of 2021, taking a significant market share. This clearly shows that fuboTV is succeeding in its strategy.
Also, consider the following graph:
As you can see above, fuboTV subscriber count is expected to reach nearly 1.8 million subscribers in 2022. This is an increase from the 1.3 million just reported in 2021, or a 40% increase in paid subscribers expected over the next 12 months.
The downside consideration: fuboTV profit margins
The pressing bearish argument is that FuboTV’s profit margins are horrible.
As you can see below, it ended the fourth quarter of 2021 with negative EBITDA margins of 36%. However, the trend is clearly improving.
Besides, I argue that this is old news. This is why the stock has been punished for so long.
And I submit that this has already been factored into his assessment countless times.
FUBO Stock Valuation – Very Cheap Valuation
fuboTV is valued at less than 1x this year’s revenue. But as we know, the big consideration that worries everyone is that the business will never be profitable.
However, here are some background items that you might find useful.
DraftKings (DKNG) is a mobile betting platform. Its price is around 3x the forward sales. Additionally, for DraftKings to increase revenue by approximately $2 billion in the coming year, it will report approximately $875 million in negative EBITDA.
Meanwhile, in the case of fuboTV, not only is it growing much faster, but its bottom line won’t be as negative as this..
On the other hand, remember that investors are not pricing this business based on the expectation of a growing bottom line. The shareholding is a growth-oriented shareholding. They expect revenue and market share growth, and on that premise, fuboTV delivers.
Additionally, aside from its convertible debt, fuboTV has no debt. Its balance sheet has a net neutral position, ie cash and debt instruments are in balance.
FuboTV will need to raise additional capital, but I don’t think it will need much more than $200-300 million in capital this year.
fuboTV is a misunderstood company. It is a sports streaming platform with bets attached. He will seriously expand his betting business this year. However, for now, we need to be a bit more patient to see that income start being reported. Betting revenue will not emerge until 2023.
However, even without the betting business, fuboTV continues to grow at over 70% CAGR to reach over $1.1 billion in revenue.
I believe that this profession is unique and that the market gives it no consideration.