It can be pretty frustrating for an investor to get a bullish thesis about a company right, only to see its stock price go the wrong way. Shares of fuboTV (FUBO -1.58%) begin the holiday-abridged trading week fetching 62% less than they did at their peak in December.
In many ways, the fundamentals for the business have only gotten better. This year, the live TV streaming platform company delivered back-to-back quarters of accelerating growth, announced a game-changing acquisition, and has consistently exceed its guidance.
FuboTV stock is starting to gain up upward momentum again. It's trading 45% above the all-time low it hit three weeks ago. Let's go over why the worst could be over for the fast-growing company's shareholders.
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A lot has happened to fuboTV since the shares hit their high-water mark of $62.20 on Dec. 22. The developments have been largely positive.
- FuboTV had boosted its year-end subscriber guidance in October and November ahead of the stock's peak. In early January, it announced preliminary subscriber growth above its earlier forecasts, and by the time it made its fourth-quarter results official in early March, it surpassed those goalposts.
- In January, it acquired Vigtory, a small sports betting and interactive gambling company. FuboTV expects to launch an online sportsbook by the end of this year, giving it a potentially lucrative revenue stream to go along with its rising subscription and ad revenue.
- The first-quarter results that it posted in May were even more impressive. Revenue soared by 135%, and it grew its subscriber count sequentially, something that it had never done through the first three months of the calendar year -- a period when sports fans typically churn out of the service.
The company at last count boasted 590,430 subscribers, and it's gaining market share. There are some valid knocks on the live TV streaming model. These types of platforms have gotten more expensive -- as channels and networks have boosted their carriage fees, the streamers have passed on the costs to consumers. Folks who cut the cord from cable or satellite television providers to save money may be taken aback when they see that the leading live TV streaming platforms start at $60 to $70 a month.
However, here's where fuboTV stands out from the competition. Its "sports first" mindset means that more than three dozen of its 100-plus live channels are dedicated to sports. Advertisers respect this, and value that audience, which helps explain why its ad revenue has more than tripled when its subscriber base has only doubled. Ad revenue per user of $7.11 a month is gravy when it's stacked on top of the more competitive subscription revenue.
We also haven't seen what fuboTV will be able to do in terms of churn, engagement, and incremental revenue with its gambling-related acquisitions. It will roll out a free-to-play fantasy sports gambling platform this summer, and follow that up with actual wagering on games a few months later.
Profitability is a near-term concern. Net loss and adjusted EBITDA margins have been improving as revenue growth outpaces rising operating costs, but the company's investments in its fantasy sports and online sportsbook initiatives should weigh on the bottom line in the coming quarters.
The outlook is still rosy here. FuboTV is already running plays out of its playbook from 2020, when it kept bumping its guidance higher. In March, management said it was targeting 760,000 to 770,000 subscribers by the end of 2021. Now, its year-end goal is 830,000 to 850,000 accounts.
FuboTV has been volatile since it IPOed last fall. Volatility will be the home team here, but that's not necessarily a bad thing. The stock has been rising sharply these past three weeks, and for now, it looks as if the stock did bottom out last month.