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There's More Than a Short Squeeze Lifting fuboTV Stock Today

By Jon Quast - Feb 1, 2021 at 11:16AM

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The sports-streaming stock is getting a price target upgrade today.

What happened

Shares of fuboTV (FUBO 3.68%) spiked higher on Monday morning after Wedbush lifted its price target for the stock. As of 10:30 a.m. EST, the stock was up 11%. However, traders potentially see fuboTV as a prime short-squeeze candidate, and short squeezes are all the rage lately with retail investors. 

So what

When a firm like Wedbush raises its price target, it's common for a stock to go up as fuboTV is doing today. The inverse is also true -- when firms lower price targets, stocks tend to immediately fall. That's one reason I believe the stock market naturally favors long-term buy-and-hold investors. After all, you never know when a prominent voice will send your stock higher or lower in the short term.

A person holds a tablet device projecting images of stock charts and rising arrows.

Image source: Getty Images.

According to The Fly, Wedbush raised its price target for fuboTV stock from $40 per share to $50 per share. And it's easy to understand the enthusiasm to some extent. After all, the company already announced preliminary numbers for the fourth quarter of 2020. Revenue is expected to be up 77% to 84% year over year, and fuboTV is expecting to report subscriber growth better than 72%. Both metrics far outpace previous guidance. 

Now what

However, there's another wrinkle to this story: Many investors have taken active bets against fuboTV stock by shorting it. While its Q4 revenue growth is great, many point out that its primary revenue stream is a money-losing venture. Because of this and other factors like increasing competition, a whopping 73% of the stock's float is sold short, according to Yahoo Finance. 

According to FINVIZ.com, fuboTV is the third-most-shorted stock among those with market capitalizations above $2 billion on major exchanges. In normal times, a stock with high short interest would repel retail investors. But these are not normal times. GameStop's epic short squeeze has actually caused some to seek out stocks like these in hopes of triggering more short squeezes. 

In the short term, this strategy is a gamble; there will likely be many traders who lose money trying to time short squeezes. That's why I believe shareholders should stay focused on the long term -- right now, fuboTV is speeding up its sports-betting platform, which will be a key component to its long-term monetization strategy. The company reports earnings on March 2, at which time management should provide some timely updates.

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Stocks Mentioned

fuboTV, Inc. Stock Quote
fuboTV, Inc.
FUBO
$3.38 (3.68%) $0.12
GameStop Corp. Stock Quote
GameStop Corp.
GME
$100.38 (9.35%) $8.58

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