Developing its gaming segment and sports-first offerings could be two ways for the streaming service to survive independently. In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on March 30, Motley Fool contributors Toby Bordelon and Rachel Warren discuss the potential areas for growth for FuboTV (FUBO -2.17%) and speculate whether it might be an acquisition target.
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Toby Bordelon: As a shareholder myself, this is not good. I've had better investments. Let's just put it that way. What's going on? Let's look at their quarter. Let's see what the business is looking like. They are growing subscribers and what I like about this chart here, as you see, they have grown year-over-year. But what this shows you is that the sequential growth from Q3 to Q4 this year is much higher than sequential growth last year. So the growth is accelerating, right? They are continuing to add members at a higher clip, which is nice to see. Advertising revenue is also growing almost double year-over-year. Now, on the flip side there, you see advertising revenue. The average revenue per user actually went down a little bit year-over-year for the quarter. You could look at that and you could say, hey, that's problematic and that's a fair view. I'm with you on that. But, it's also an opportunity because, as they add subscribers, if they can just get that average revenue per user up a little bit, it's going to be very beneficial to them overall. They are still losing money as we see here. But the loss is getting better. They're not losing as much in terms of net loss. Obviously, to say, hey, we're losing money, but it's not as much, but it's something, right? It's something. It's still a young company that's still growing. So, you want to give them a little bit of room to run there. What's their solution to losing money? Well, just add subscribers. Grow subscribers, grow your revenue and eventually, hopefully, your net income will turn positive. That's what they are looking at. You can see their guidance here broken out by North America and the rest of the world in terms of subscriber growth and in terms of streaming. Total revenue, to give you an idea, was $638 million last year, so if they could exceed that $1 billion mark next year, that would be fantastic. First-quarter growth, in terms of subscribers, doesn't look great. Given they had 1.13 million subscribers at the end of last year. But if they can hit that almost 1.8 million for the full-year, if they can hit that number, that would really be something. The gaming business is looking promising to them. They are seeing some good news there. They now have market access agreements in 10 states. They added Mississippi, Louisiana, Montana in February through a deal with Caesars (NASDAQ: CZR). This is all subject to regulatory approval. But that is starting to grow and it's starting to look like it may be a nice business for them. They just added a former NFL Executive Julie Haddon to their Board last week. She is the owner of the Chicago Red Stars, professional women's soccer club. You can see with this Board addition, they're really leaning even more into that sports segment, which I think is probably their best avenue of growth. So there are signs of promise here, but it's going to be a slog.
Rachel Warren: It's interesting to me, I was thinking about this. The space is so crowded, it seems hard to imagine players like FuboTV being able to really compete with the likes of Netflix (NFLX 2.60%) or Disney (DIS -0.65%). Of course, there is that gaming segment which is quite interesting and there could be a lot of potential there. But at the end of the day, do you see this company as a more likely acquisition target? Why or why not?
Bordelon: That's a good question. I'm going to say probably yes. The big issue with Fubo is they have no original content. They are reliant on third-party owners and generators, especially the sports leagues. That's not a great situation to be in long-term. I'd not be surprised to see an acquisition. The question is, where does it come from? Does it come from the streaming studio network side of the business? Someone who wants a sports-focused streaming network maybe? Or, does it come from one in the gaming industry? You say, hey, this is something that might be interesting for us to work on. It's hard to say. The business is going to look different depending on where that acquisition might come from. But, I actually do see a path to independent success. It's a small one and I think it involves them locking down contracts with all the major sports leagues and saying, hey, what we're going to be is the primary consolidated place where you can get all of your sports streaming in one place. If they can pull that off, it looks really, really interesting. If they can do that, they can be independent for the long-term. But honestly, given the direction of streaming right now with multiple services owned by the owners of contents and siloing off to some degree, it's getting harder for me to see how Fubo survives long-term as an independent company though there is a chance, I think.