fuboTV (FUBO 0.72%), the sports-centric streaming substitute for cable TV, reported third-quarter results after the market closed on Nov. 9. The announcement reveals fuboTV is growing revenue rapidly as consumers increasingly prefer the convenient service. Moreover, this trend is unlikely to reverse and could provide a several-year-long tailwind for fuboTV.
Still, investors were not impressed with the company's figures and sent the stock down by more than 20% on the day following the release. Let's take a closer look at fuboTV's impressive sales figures and discern why the market did not like what it saw.
fuboTV stock falls by over 20% on the day after its Q3 earnings release. Image source: Getty Images.
fuboTV revenue surges in the third quarter
Streaming service fuboTV reported revenue of $156.7 million in its fiscal third quarter ended Sept. 30. That's 156% higher than the prior-year quarter -- an impressive feat, considering that consumers were stuck at home last year, searching for home entertainment options. Growing revenue this much while economies were reopening and people had more to do outside of their homes is impressive.
Moreover, management expects the momentum to continue and has raised its outlook for the rest of the fiscal year. The company now forecasts revenue in the range of $612 million to $617 million, which would be a year-over-year increase of 135%. That's up from its previous revenue growth forecast of 116%.
Interestingly, fuboTV's streaming service carries a robust selection of sports channels, and the ongoing trend this year is that fans are watching more sports now that stadiums are filled. Admittedly, watching a game on TV is more exciting when you see fans in the stadium screaming, roaring, and jeering.
The company is also benefiting as more people choose to stream their content instead of watching traditional cable TV. With streaming, you can take your content anywhere you can take a mobile device. The same cannot be said with cable, where you are stuck watching on your home or office TV screens. To make matters worse for cable, streaming alternatives are often less expensive.
The market sends fuboTV stock down sharply
Despite the explosive revenue growth figures, fuboTV's stock was down over 20% on the day following the earnings announcement. It's hard to discern precisely what disappointed investors enough to sell the stock so aggressively. One explanation could be that fuboTV saw another negative quarter in its bottom line; the company generated a net loss of $105.9 million.
In addition, the company's cash from operations was a negative $143 million. Those losses could be troubling because fuboTV ended Q3 with just $393 million in cash on its balance sheet. It cannot sustain these losses for much longer without raising additional capital, either by selling stock or borrowing money. The sell-off in fuboTV's stock could be the market sending management a signal to get on a more sustainable growth trajectory.
