fuboTV (FUBO -11.61%) is a sports-centric alternative to cable TV. Revenue and customer growth surged as demand for in-home entertainment proliferated at the pandemic onset.
Now that economies are reopening, the road ahead is more challenging for the streaming provider. Looking specifically at the rest of 2022, here is one green flag and one red flag for investors considering fuboTV.
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The green flag
Even though economies are reopening and folks are spending more time away from home, fuboTV is adding new subscribers briskly. In its most recent quarter ended Dec. 31, fuboTV boasted 1.1 million subscribers. That was up by 106% from the same quarter the year before. The tailwind from stay-at-home orders may be fading, but fuboTV has one other tailwind at its back -- its superiority over cable TV.
A streaming live TV service can be a significant upgrade from cable TV for most folks. The streaming subscription can be viewed on multiple devices and TVs, and can be taken anywhere mobile devices can get an internet connection. Further, the streaming subscription often costs less than cable TV, with no onerous long-term contracts that come with hefty cancellation fees.
To add salt to the wound for cable providers, a streaming service can be started in a few clicks and less than five minutes, while a cable provider has to send out a professional installer to your home. These advantages are partly why management is confident subscriber growth will continue in 2022. The company issued guidance that forecasts 1.5 million paying subs by year-end.
And unlike the pandemic tailwind, this one is unlikely to reverse, making it a green flag for 2022 and beyond.
The red flag
Of course, subscriber growth becomes easier the lower you price your service. That is precisely the factor investors should look out for as a red flag for fuboTV in 2022. The company is reporting massive losses on the bottom line. The most oversized expense item is subscriber-related.
In its most recent quarter ended Dec. 31, fuboTV's subscriber-related expenses as a percentage of revenue were 93.5%. To make this look even worse, it increased from 85.6% in the same quarter the prior year. The company added new content to its offering without raising prices sufficiently to cover the cost of the latest additions. In other words, it increased the customer value proposition at the expense of its bottom line.Considering that context, it makes fuboTV's 2.75 times faster growth than the live TV streaming market in the fourth quarter look less impressive.
Overall, fuboTV lost $383 million on the bottom line in 2021 on revenue of $638 million. fuboTV has not guided investors on losses for 2022, but it did issue revenue guidance of $1.085 billion at the midpoint for 2022. That would be another year of robust top-line growth. Revenue will not likely be a problem for fuboTV in 2022; rather, the red flag investors need to look out for is how the losses pile up on the bottom line.
