fuboTV (FUBO 2.40%) showed all the potential to be millionaire-making stock due to its robust growth in subscribers and market-leading position as a sports-centric TV streaming service. And the stock looks tempting as it is down 78% over the last year despite continued growth in the business. But the company's recent quarter and management's 2023 guidance raise questions about how competitive it really is.
Let's a look at fuboTV's fourth-quarter results, and why its best days may very well be behind it.
The positives about fuboTV
fuboTV ended 2022 on a high note. Total revenue grew 38% year over year, driven by strong gains in North America, where subscriber count grew 29% year over year and average revenue per member improved by 4%. The latter was due to a healthy uptake in premium-priced subscription bundles. The strong performance also reflects a strong advertising year, in which fuboTV's top 10 advertisers from 2021 increased their spending by 85% year over year.
One of the main drawbacks for the stock has been the company's mounting losses in profitability, which is the reason its stock has fallen over the last few years. But the company made progress to reach its long-term profit goals. The fourth-quarter adjusted net loss of $0.39 per share was better than Wall Street's expectation for a loss of $0.71. And on that note, management expects all key operating metrics to improve in 2023, and it reaffirmed its goal of reaching positive free cash flow in 2025.
The negatives about fuboTV
It was a solid quarter all around, and it is very encouraging to see the narrowing losses on the bottom line. But the quarter raised more questions about the company's ability to deliver returns to investors.
To cover its operating losses, the company announced a $68 million share issuance, which will further dilute shareholders' positions in the stock. Over the last few years, fuboTV's share count has increased from less than 60 million to 200 million, which means shareholders who bought the stock in 2020 now own about 75% less of the company. A stock is not going to move higher when the company is constantly diluting shareholders to this extreme.
FUBO Average Diluted Shares Outstanding (Quarterly) data by YCharts
But the biggest negative was management's guidance, which calls for subscribers to reach just over 1.5 million in 2023, which isn't much growth over the 1.44 million in the fourth quarter. It makes investors question the service's value proposition, with well-financed tech giants pursuing sports rights for their respective streaming services.
fuboTV's main advantage has been its wide selection of sports content. But Alphabet is set to offer NFL Sunday Ticket to its YouTube audience. And Amazon and Apple are reportedly pursuing NBA rights for their streaming services.
The soft subscriber guidance also doesn't look good coming on the heels of recent price increases for its U.S.-based plan and RSN sports package. While management is not seeing any issues with cancellations since the price increases went into effect, the lower growth expectations this year still give investors pause considering the increasing competition.
Overall, the lower guidance leaves a lot of uncertainty about whether the company's best days are behind it. Because of this, investors should consider other streaming stocks over fuboTV.
