Please ensure Javascript is enabled for purposes of website accessibility

Why It's Not Too Late to Consider This Hypergrowth Stock

By Parkev Tatevosian - Jun 30, 2021 at 7:17AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is growing revenue and subscriber figures fast and has plans to turbocharge that growth further.

fuboTV's (FUBO 16.84%) stock is up by over 40% in the last month. The company delivered an excellent performance in the first quarter, doubling subscribers, total revenue, and advertising revenue from the same quarter last year.

fuboTV is benefiting from a secular tailwind as consumers shift their viewing away from linear TV. Despite its run-up of late, this hypergrowth stock is still down 14% in the last six months. Let's look at why it's not too late to consider fuboTV. 

A smiling couple eating pizza by the couch.

Image source: Getty Images.

Playing with the big boys

fuboTV is a sports-centric streaming service. That targeted audience is allowing it to carve out a niche against giants like Alphabet (GOOG -0.55%) (GOOGL -0.61%) and Walt Disney (DIS -1.38%), each of whom offers a competing service to fuboTV's. 

Alphabet does not report subscriber figures to its live TV streaming service, but Walt Disney's Hulu reported 3.8 million live TV subscriptions. fuboTV is smaller at 590,000 subscribers, but it's growing faster. The company more than doubled subscriptions from the same time last year, while Hulu increased by 15%.

What's more, in the most recent quarter, when Hulu lost 200,000 subscribers, fuboTV added 43,000. The end of the NFL season usually coincides with a loss of subscribers for live TV services. It was a pleasant surprise when, for the first time in the company's history, fuboTV gained subs between the fourth quarter and the first quarter.

That could indicate fuboTV is generating stronger relationships with subscribers compared to Hulu. Although it may be too early to come to this conclusion, it is certainly a good sign for those interested in the stock. 

A group of friends sharing popcorn around the couch.

Image source: Getty Images.

Advertising growth 

fuboTV supplements subscriber revenue with advertising sales. Even though it's a small part of the business right now, it's growing more important. Advertising revenue tripled in the most recent quarter to $12.6 million from $4.1 million at the same time last year. It now makes up 11% of total revenue compared to 8% last year.

The trend is a good sign for investors because advertising revenue is generally more profitable than subscription revenue. And the growth is not likely to stop here. According to a report by GroupM, connected TV ad spend is estimated to grow 25% to $16 billion this year, then reach $31 billion by 2026.  

Sportsbook, international expansion 

The rapid increases in subscribers and advertising revenue is perhaps what's giving management confidence to broaden the company's horizon. Later this year, fuboTV will launch an online sportsbook. From the looks of it, that could be a good idea. fuboTV attracts a sports-leaning subscriber base, which could view the option to wager with fuboTV favorably. And with an existing subscriber base, fuboTV may not have to spend lavishly on marketing or player bonuses to acquire customers in the same way that DraftKings (DKNG 9.78%) does.

Moreover, fuboTV is already testing the waters with international expansion. The company has begun operations in Canada and Spain.

fuboTV is not settling on growing its existing business in static geographies. With plans for an online sportsbook and international expansion to supplement domestic subscriber growth and advertising revenue growth, fuboTV is poised to get bigger. For those reasons, it's not too late for investors to hop aboard this hypergrowth stock. 

 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Parkev Tatevosian owns shares of Alphabet (C shares) and Walt Disney. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Walt Disney. The Motley Fool recommends fuboTV, Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

fuboTV, Inc. Stock Quote
fuboTV, Inc.
FUBO
$3.47 (16.84%) $0.50
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$117.47 (-0.61%) $0.72
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$106.63 (-1.38%) $-1.49
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$118.22 (-0.55%) $0.65
DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$17.96 (9.78%) $1.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.