Is the glass half full or half empty? It's a question investors struggled to answer of streaming cable company fuboTV (FUBO -3.50%) following Wednesday's post-close release of its fourth-quarter numbers. Shares initially tumbled on lackluster guidance for the quarter now underway, then rallied an impressive 10% -- with the rest of the market -- during Thursday's regular trading, only to fall again in Thursday's after-hours action. Topping revenue and subscriber estimates may or may not be good enough, it seems.
Largely lost in all the near-term noise is a much brighter future than the recent sell-off would suggest awaits. With or without this past week's volatility, the stock is still down on the order of 80% from last year's highs despite the company's clear potential. You just have to look far enough into the future to see this prospective growth.
Interpreting the latest numbers
For the record, fuboTV ended the final quarter of fiscal 2021 with 1.13 million paying subscribers who collectively contributed $230 million worth of revenue to the company. That's 186,000 more customers than it was serving at the end of Q3, and that top line was up 119% year over year (after stripping out the benefit of last year's acquisition of French streaming-television start-up Molotov).
The fourth quarter's bottom line and first quarter's guidance aren't quite as encouraging. The net loss grew from $112 million to about $168 million, and the company is looking to end the current quarter with 1.26 million to 1.27 million subscribers, a net addition of only about 135,000.
Maybe the guidance is encouraging enough; it's difficult to say for certain. CEO John Janedis warned shareholders during the quarterly conference call that "Q1 has historically been softer than Q4 when viewed sequentially on revenue and subscribers," and some investors have filled in the uncertainty of that statement with their own assumptions.
Forward progress is enough for now
Here's the rub: All this discussion obscures a much bigger and more encouraging point. Forget last quarter. For that matter, forget the current quarter. Heck, full-year revenue guidance of between $1.23 billion and $1.29 billion isn't even all that important.
Instead, take a step back and look at the progress the analyst community sees for the next four years. While fuboTV will still likely be in the red in 2025, solid revenue growth during this stretch should cut into the degree of losses it's taking now. The top line, in fact, is expected to nearly quintuple between 2021 and 2025. The chart below tells the story.
Data source: Thomson Reuters. Chart by author.
It's arguable that analysts are keeping their expectations of fuboTV's growth in check for one overarching reason -- nobody knows for sure how to handicap its budding sports-betting business, including fuboTV itself. Nonetheless, it's brewing.
Don't sweat it if you're not familiar with it. Most investors aren't. While fuboTV's roots are sports-oriented, and it's still considered a sports-first streaming cable television platform, the betting piece of the company's platform is still very new. Indeed, its sportsbook app that integrates with its streaming-television app only launched in November of last year and only in one state: Iowa. FuboTV just added Arizona to the mix in December.
Factor in that it's still likely figuring out how to make the most of its early 2021 acquisition of sportsbook technology outfit Vigtory, it's not a stretch to say fuboTV's sports-betting venture remains very much in its infancy.
The potential is tremendous, though. Numbers from Nielsen indicate that more than half of all sports enthusiasts in the United States are also interested in placing wagers on what they're watching. Hockey fans are the most likely to do so with 62% of NHL viewers saying they'd like to place bets on professional hockey games. And as more and more states legalize the business (as a means of generating tax revenue), market research outfit Technavio estimates the global sports-betting market will grow at an annualized clip of 10% between 2020 and 2025.
By offering access to both wagering and watching in a unified platform, fuboTV is well-positioned to capture more than its fair share of whatever growth is in store on this front. Given all this, the analyst community may be underestimating just how much potential the sports-betting market offers fuboTV. The company itself isn't even considering this market with its Q1 and 2022 guidance numbers.
The right kind of risk for the right kind of investor
None of this is to suggest fuboTV is an appropriate pick for any and all portfolios. Owning unprofitable companies is always riskier than holding profitable ones, particularly when it's unclear when -- or even if -- that organization will work its way out of the red and into the black. The stock is still fighting analyst downgrades linked to this profit concern.
However, for risk-tolerant investors who can stomach the volatility, this ticker is an intriguing prospect. It's poised to make forward fiscal progress, which the market is apt to reward en route to profitability. And while still unprofitable, the stock's priced at a dirt-cheap 1.9 times sales. Even if the company only swings to the most modest profit margin rates sooner than expected, this should be heartening to investors.
