One of last week's biggest earnings-season surprises came from fuboTV (FUBO -3.50%). The live TV streaming service provider saw its stock soar 31% on Friday after posting blowout quarterly results.
Long-time investors will need more than a one-day pop to ease the pain of the ownership experience. Shares of the sports-centric platform have been cut by more than half since a recent February high, even after Friday's surge. Go back to the all-time high it set around the 2020 holiday season, and fuboTV is down a blistering 98%.
Putting up better-than-expected financial results is always appreciated, but fuboTV can't stop there if it wants to earn a victory lap. Let's take a closer look at last week's encouraging report, as well as what the growing but deficit-riddled media provider will need to do in the year ahead to win back the market's attention and respect.
Going into overtime
Cord-cutting is real, and the appeal of a live TV streaming service is natural for former cable and satellite television customers. You can continue to access the same dozens (if not hundreds) of local networks and national media channels that you did before in real time, coupled with the convenience of easily stopping or restarting the service without cumbersome hardware installations.
Live TV streaming platforms are great for consumers, but investors haven't been as fortunate. Programming costs are prohibitive with all of the network licensing deals, and cutthroat pricing makes this a challenging niche to run profitably. FuboTV has just 1.285 million paid subscribers, but even the largest player -- Alphabet's (GOOG 0.74%) (GOOGL 0.55%) YouTube TV -- has struggled to grow to 5 million accounts. We're nowhere close to the leading premium streaming services with nine-figure global audiences.
It's against this ho-hum backdrop that fuboTV delivered strong results late last week. Revenue rose 34% to $316.5 million. Guidance back in February was calling for just $295 million to $300 million on the top line. FuboTV's audience of paid subscribers rose 22% to 1.285 million, well ahead of its initial forecast of ending March with just 1.14 million to 1.16 million accounts.
Paying for a live TV streaming service isn't cheap. FuboTV's average revenue per user has risen from $71.43 a month to $76.79 a month over the past year. The entirety of that bump is pricing increases, as carriage rights to stream popular channels continue to rise. Total advertising revenue was flat in this iffy environment for the marketer missives, down 1% year over year and substantially lower on a per-subscriber basis.
Losses continue on the bottom line, but the math is getting kinder for fuboTV. It clocks in with year-over-year improvement in cash burn, net loss, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). There's still a long way to go before turning the corner, but fuboTV is committed to turning cash-flow positive in 2025.
FuboTV has had to scale back on its once-ambitious dreams of being a hotbed for gambling. It launched predictive fantasy games on its app with plans to eventually roll out its own online sportsbook.
When your sales pitch for potential subscribers is a wide breadth of live sports worldwide, you're going to have a juicy target audience of potential gamblers. However, it costs a lot of money -- and time, given the regulatory nuances of the industry -- to make that work. FuboTV abandoned those plans late last year.
Image source: Getty Images.
The final score
Building on the momentum of last week's strong quarter isn't easy. FuboTV's stock chart over the past 2 1/2 years is brutal. Bears were right about fuboTV failing to win the wagering war, and the fear is that they could be right about fuboTV running out of money to burn.
There are some signs of life. FuboTV closed out the first quarter with $364.8 million in cash and equivalents on its balance sheet. It's gone through layoffs and punted the ball on gaming, unfortunate events on the surface but confirmation that fuboTV realizes that the best offense is sometimes a good defense.
The key to fuboTV beating the market in the coming year is its ability to grow its business while improving its bottom-line performance. It did increase its full-year subscriber guidance last week. It now sees 1.55 million to 1.57 million subs by the end of this year, up from both the 1.51 million to 1.53 million it was modeling three months ago and the 1.445 million subscribers it was serving at the end of last year.
It will get harder for fuboTV to stand out with its sports programming among the streaming service stocks. YouTube TV will be paying $2 billion a year to take over the juicy NFL Sunday Ticket package from DirecTV this fall, making it the obvious choice for cable-cutting football fans. FuboTV still has some strong ties to international sports programming, but it's clearly an underdog at this point.
This doesn't mean that it can't be a buyout target, especially if it shows the industry that it can grow its top line while inching closer to profitability at the other end of the income statement. There's more than one way to win this game.
