There's a new bull in fuboTV's (FUBO 1.25%) corner. Barrington analyst James Goss has picked up coverage of the fledgling live-TV streaming service with an outperform rating. His $40 price target for the stock is nearly 33% higher than where it closed Wednesday.
Goss is impressed by fuboTV's value proposition for sports fans, as roughly 40 of the 117 live-streaming channels it offers in its base package are dedicated to global sporting events. He accepts fuboTV's current lack of profitability, but feels that management is making the right moves to get into the black.
Highs and lows of live sports
A $40 price target may not seem like much for shares that traded as high as $62.29 last month before being cut in half. The Street-high price goal is at $60. However, in a week in which fuboTV's most vocal bear slashed his target to $6.50, the contrast is as newsworthy as it is welcome to fans of the volatile stock.
FuboTV remains one of the more polarizing stocks in the realm of publicly traded streaming platforms. The company is growing fast: Revenue rose 71% in the third quarter, and growth accelerated to between 77% and 84% in the fourth quarter, based on preliminary results it announced earlier this month.
The company is also small. It kicked off 2021 with 545,000 subscribers. However, the service isn't cheap, and fuboTV does a great job of monetizing its traffic. As one of a half-dozen viable replacements for cord-cutters looking for a streaming live-TV service to replace their bloated cable or satellite plans, fuboTV starts at $64.99 a month. It generates ad revenue from its captive audience, members of which stream an average of four hours of fuboTV a day, and the average of $7.50 per user that it's collecting on that end is substantial. Market darling Roku generates less than a third as much per user in ad revenue. And fuboTV's ad revenue is more than either Disney or Apple are ringing up in subscription revenue per user.
All of those services are substantially larger than fuboTV, of course. However, those figures do show its strength in monetizing its sports-hungry audience.
FuboTV is just getting started on the monetization front. It has acquired small sports betting outfits in back-to-back months. Last month's deal for Balto Sports will help it launch a free-to-play fantasy sports experience for subscribers this summer. Vigotry's addition this month will help it launch a sportsbook before the end of the year.
Warming up to sports wagering is going to be a feast-or-famine move for fuboTV. Its push into this niche is one reason why Rich Greenfield at LightShed Partners lowered his price target on the stock from $8 to $6.50, arguing that the platform operator will need to raise at least $1 billion in equity this year to bankroll its sports betting strategy. However, it would be hard to find a better audience than the folks who have chosen fuboTV as their live-TV streaming service if you want to cash in on the growing sports wagering market. It also only helps that fuboTV is competing against tech giants, telecoms, and media companies that will likely meet heavy resistance if they try to follow in its footsteps.
It's OK that not everyone is bullish on fuboTV. You need two sides to every wager.