Shares of sports streaming service fuboTV (FUBO 7.01%) were up on Friday in sharp contrast to the broad decline of the stock market. As of 12:50 p.m. ET, fuboTV stock was up 4% but it had been up as much as 10% earlier in the session. And it's up because it scored an analyst upgrade that suggests substantial upside for shareholders from here.
Analyst Michael Pachter of Wedbush believes that fuboTV stock can beat the market from here and he accordingly upgraded the stock, according to The Fly. Investors were likely encouraged by Pachter's price target of $6 per share, which represents roughly 50% upside from where the stock traded at yesterday's close.
However, Pachter's commentary comes with some pretty significant asterisks, in my opinion. First, he thinks fuboTV can become profitable by 2025, which is another way of saying he expects the company to be unprofitable for roughly another two to three years. That's a long time yet.
Keep in mind that fuboTV lost more than $200 million in cash from operations in the first half of 2022 alone, so its cash burn is significant. But Pachter is nevertheless encouraged and believes the company will be able to get more financing, which implies his belief that fuboTV will in fact need financing at some point.
Therefore, while the market is understandably optimistic about fuboTV's potential returns from here, it's important to remember some of the risks that Pachter included in his comments.
FuboTV's stated goals are in line with Pachter's comments. The company hopes to achieve profitability on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis by 2025. In the meantime, the company will lean on its $379 million in cash and short-term investments for as long as it can.