In hindsight, the meteoric rally that fuboTV (FUBO +0.00%) shares dished out back in 2020 was too much, too fast. The proof? The stock's now sitting 96% below its late-2020 high.
Just as the bulls were too overzealous then, however, the bears have arguably overshot their target in the meantime. And that ultimately spells opportunity for growth-seeking investors with appetites for a little risk. The young company (and even younger stock) are now near the end of the usual post-public-offering volatility; the wind-down of the COVID-19 pandemic is a factor, too.
With this dust finally settling, the shares should begin more reliably reflecting how well fuboTV is capitalizing on its unique offering.
NYSE: FUBO
Key Data Points
The right product at the right price
What is fuboTV exactly? It is a cable television company except it's not your conventional kind transmitting on coaxial cables that run all the way to your home. It's considered a virtual multichannel video programming distributor -- or vMVPD -- meaning it digitally delivers cable programming using a customer's existing broadband connection.
Yes, the country's cable TV industry is still slowly dying. Its ever-rising price and the ongoing advent of streaming services continue to chip away at cable's hold on consumers. Numbers from Leichtman Research Group suggest another 1.7 million U.S. households cut the cord in the second quarter of 2023, extending a trend that's been underway for years now.
Yet, fuboTV isn't losing customers. It's gaining them, reporting a 23% year-over-year increase to 1.167 million North American customers during the second quarter of this year. It also grew its overseas streaming customer headcount from 305,000 in the second quarter of 2022 to 379,000 now.
Data source: fuboTV Inc. Chart by author. (Note that customer declines are not uncommon during the first half of any given calendar year, and more than offset during the second of the year.)
What gives? How is fuboTV able to do what most other cable companies can't? There are two chief explanations.
First, by virtue of being a virtual cable service provider, fuboTV's monthly price isn't bloated by a pile of localized taxes and fees -- a figure Consumer Reports says now adds an average of $37 to the typical U.S. cable customer's monthly bill. The price you pay for fuboTV is exactly each plan's price listed at the website, ranging from $74.99 to $99.99 per month, depending on the package you choose.
The second reason fuboTV is winning when other cable players aren't: It caters to sports fans without forcing them to pay for a bunch of channels they don't watch. All of its lineups include access to all-important ESPN as well as FS1, but can also include channels like the NFL Network's Red Zone and Premier League soccer -- programming that isn't exactly easy to access in the United States.
And that's no minor detail. A recent survey performed by CableTV.com indicates access to live sports programming is the No. 1 reason people stick with cable. Meanwhile, fuboTV's cable lineups don't include PBS, CNN, Lifetime, AMC, The History Channel, A&E, TNT, and a handful of others. Not carrying these less-watched channels is how the company is able to keep its prices relatively low.
Moving in the right fiscal direction
None of that, however, is the overarching reason you might want to take a swing on fuboTV shares while they're down 96% from their peak. Far more bullish is the fact that fuboTV's business model works. That is to say, the company's found the right balance between its channel lineup and price. Consumers are responding by paying for it.
That doesn't mean fuboTV is wildly profitable -- at least, not yet. It's making progress to that end, though. The graphic below puts things in perspective. Like many other young companies, fuboTV's losses were still widening through 2020 even though its top line continued reaching new records during that time.
Late last year, however, something funny started happening. Those operating and net losses began to shrink. This trend has continued on into this year.
FUBO Revenue (Quarterly) data by YCharts
It's still losing money by all measures, to be clear. That's not the point though. The big takeaway here is the trajectory. Operating losses are shrinking. Free cash flow is working its way from negative to positive. In this vein, fuboTV maintains its goal of positive free cash flow by 2025. The fact that the company is setting such expectations with investors is telling -- bullishly.
Yet, that's not the only high bar fuboTV is willing to publicly set. It also expects to report 1.34 million paying North American subscribers with its third-quarter results. By the end of the year the company believes it will be serving roughly 1.575 million such customers. Both would be records for their respective quarters.
This growth should also ultimately generate full-year North American revenue of around $1.27 billion. Analysts, however, expect this particular growth streak to last well beyond the remainder of the year.
Data source: StockAnalysis.com. Chart by author.
The same analyst community also maintains a consensus price target of $3.60 per share, which is more than 40% above fuboTV stock's present price.
For risk appetites only
If you're looking for an outright guarantee that fuboTV shares have already hit bottom -- forget it. There may be more downside left to play out. After all, stocks of pre-profit companies can do unpredictable things.
If you can stomach a bit of uncertainty (and the volatility it often brings with it), however, fuboTV's an interesting prospect for a portion of your higher-risk capital. Its product offers the cable television service that people want at a price they're willing to pay. It's just going to take a little time for consumers to connect the dots.
