What happened
Shares of fuboTV (FUBO -0.72%) gained 44.2% in August 2022, according to data from S&P Global Market Intelligence. The sport-focused TV streaming service surged even higher near the middle of the month, peaking at an August gain of 153% in a single-day spike. Here's what drove fuboTV's temporary and longer-lasting gains last month.
So what
2022 roughed up fuboTV's stock in the first seven months. Entering August, share prices were down 91% due to a broad market retreat from high-octane growth stocks with limited bottom-line profits. With a predictable string of negative earnings and free cash flows in the rear-view mirror, fuboTV fits the description of a risky stock. The brutal price cuts in the first half of the year spring-loaded fuboTV's shares for an impressive rebound on the first hint of good news.
A robust earnings report provided that inspiration on Aug. 4. Top-line sales landed at $222 million, 70% above the year-ago period's result. Net losses increased from $0.38 to $0.63 per share. The revenue reading fell short of Wall Street's expectations, but your average analyst was prepared to accept a larger net loss of roughly $0.71 per share. Ad sales increased despite a tough market for ad spots in digital media. fuboTV's global subscriber count increased by 57% year over year, landing at 1.57 million names. The stock closed the next trading session 16.8% higher.
The next week, fuboTV signed a first-look content development deal with Ryan Reynolds' production company, Maximum Effort Productions. The multiyear agreement covers unscripted content and creates a dedicated Maximum Effort channel on the fuboTV platform. The production studio's scripted features are still bound to a three-year deal with Paramount Global. This announcement gave fuboTV's stock another boost, lifting share prices by 13.3% on Aug. 8.
And let's not forget about the mid-month spike in share prices. fuboTV's stock skyrocketed on Aug. 16, with trading volumes many times their normal levels:
The surge coincided with the company's annual analyst day, but the analysts in attendance saw no reason why that event would inspire a sudden price surge. Instead, the price spike had all the hallmarks of a so-called short squeeze, where investors who actively bet against the stock are forced to close their short-sale positions. This particular squeeze was just a memory the next day as share prices and trading volumes returned to normal levels right away.
Now what
fuboTV's management expects top-line sales to increase by a compound average of 20% per year until 2025, after which the company's free cash flows should turn positive. If these bullish projections turn out to be accurate, the stock looks like a bargain at today's prices.
However, the company must still execute its long-term growth plans while staving off challenges from big names in the media-streaming and sports broadcasting sectors. That's no walk in the park. fuboTV's negative cash flows and limited cash reserves can only complicate matters, as the company is in the habit of raising debt and selling more shares in order to keep the business afloat.
I like fuboTV's focus on live sporting events and its high-octane sales growth, but I'm worried about the copious amount of red ink on this company's bottom line and its shaky balance sheet. Long story short, fuboTV may become a long-term winner but you shouldn't bet the farm on this risky stock. Right now, it's suitable for small, speculative investments.
