One of the hottest streaming stocks of 2023 is fuboTV (FUBO 1.46%). The upstart sports streaming specialist has been outperforming behemoths like Netflix (up 29%) and Warner Bros. Discovery (11%) by a wide margin, with gains of around 50% thus far. But despite the impressive performance, fuboTV is still nowhere near its 52-week high of $4.73. Is it a good stock buy right now?
Revenue continues to climb
The appeal of fuboTV is that this is a small-cap stock with some promising runway. It offers streaming packages that include live sports. That's something that other streaming services lack. For cord cutters, fuboTV is a potentially more attractive alternative to traditional cable as it has hundreds of channels available.
But with its Ultimate Plan costing $100 per month, it's also comparable to cable in terms of price. However, that hasn't hurt its growth -- the company has been continuing to deliver strong top-line numbers. Revenue totaling $312.7 million for the period ended June 30 was up 41% year over year. For the full year, the company expects its revenue to come in at around $1.3 billion, up 29% from the prior year.
The streaming company has been achieving this despite having roughly 1.2 million paid subscribers in North America. By comparison, Alphabet's YouTube TV has 6.3 million subscribers.
Can fuboTV post a profit?
The biggest worry for investors isn't the top line -- it's whether fuboTV has a realistic path to profitability. Its operating loss last quarter totaled $52.5 million. That was an improvement from the $91.4 million loss it incurred in the prior-year period.
But with subscriber-related expenses totaling $271 million, that one line item eats up 87% of the company's total revenue. That's before factoring in administrative expenses and sales and marketing costs. fuboTV is paying a lot for its content, and that puts into doubt whether the company can realistically hit breakeven.
The company is confident that it can reach profitability by 2025. But at the same time, its gross margin is an incredibly modest 7%. Without a drastic change in its cost structure, it'll be a significant accomplishment for the company to hit breakeven within a few years, especially amid inflation and rising labor costs.
The risk of dilution remains high
Another concern that investors should consider is the risk of dilution. Not only is fuboTV unprofitable, but it's also consistently burning through cash just from its day-to-day operating activities. And over the years, it hasn't been hesitant to issue shares.
FUBO Cash from Operations (Quarterly) data by YCharts
If the company continues burning cash at a rate of around $70 million per quarter, its cash and cash equivalents balance ($293.5 million) may barely be enough to last a year -- and that's assuming the company doesn't spend heavily on investing activities.
Should you buy fuboTV stock?
Management at fuboTV believes it has ample liquidity on hand to get it to when it achieves positive free cash flow in 2025, but investors should have their doubts. The company is operating in a highly competitive area, and with Alphabet as a competitor, it'll face a tough road ahead to grow subscribers, especially as people look to cut costs and trim their budgets.
There's a lot that would have to go right for the business to improve sufficiently to the point that fuboTV becomes a safe buy, and it's just nowhere near that today. And it would be incredibly optimistic to assume that it will be both profitable and generating free cash flow within a few years.
Although it has achieved some significant gains this year, fuboTV isn't a stock worth buying right now as the risk is simply far too high.
