FuboTV Stock Down 18% in December – Time to Buy FUBO Stock?

The price of FuboTV stock is down 18% so far this month after the company announced the completion of a couple of acquisitions and the official launch of its first active sports betting offering for residents of Arizona.

This downtrend started back in November following the release of the firm’s financial results covering the third quarter of 2021 and it accelerated shortly after the firm announced the acquisition of a French streaming service called Molotov SAS in a cash-and-equity transaction that valued the firm at $190 million.

Only a month after, FuboTV announced that the acquisition was completed and, to complete the payment of the equity portion of the transaction, approximately 9.5 million shares would have to be issued by the company.

Interestingly, 5.9 million shares connected to the Molotov deal were immediately sold by those who received it, at an average price of $17 per share.

Despite the dilutive nature of the transaction, various prominent financial firms initiated coverage of FuboTV stock with a buy rating including JP Morgan & Chase and Needham. The two firms set price targets of $28 and $60 per share respectively for the sports streaming platform.

Meanwhile, on 28 December, Roth Capital maintained its buy rating on FuboTV stock but trimmed its price target to $28, down from a previous forecast of $45 per share.

What could be expected from this growth stock next year after such a volatile 2021? In this article, I’ll be assessing the price action and fundamentals of FUBO stock to outline plausible scenarios for the future.

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FuboTV Stock – Technical Analysis

In my previous article about FuboTV, I emphasized that a break below the descending price channel highlighted in the chart could lead to a sizable correction for the stock.

This is exactly what happened on the days that followed and, even though the price retested this former support area now turned to resistance, FUBO shares went on to shed more than 20% of their value since that break occurred.

Now, the price is getting closer to another relevant support area found at the $14.5 level. However, momentum indicators are pointing to a potential short-term turnaround as a slight bullish divergence has appeared in both the Relative Strength Index (RSI) and the MACD.

In this regard, even though the price has continued to decline in the past couple of sessions, the RSI has been posting a series of higher lows, indicating that negative momentum is decelerating.

Meanwhile, the MACD has just crossed above the signal line and histogram readings have turned positive.

These technical readings are pointing to a short-term technical rebound in the making but the mid-term outlook remains bearish as long as FUBO stock remains trading below its short-term and mid-term moving averages.

If the $14.5 per share support holds, chances are that losses will remain contained in the near future which means that the upside potential at this point exceeds the downside risk.

FuboTV Stock – Fundamental Analysis

The completion of Molotov’s acquisition is giving FuboTV more access to the European and African markets. This platform currently has 17 million registered users.

Additionally, the company’s now active sports betting operation in Arizona is opening up the tab of what could be a promising new revenue stream for the company.

Meanwhile, the 9.5 million shares that FuboTV had to issue to acquire Molotov represented only 6.7% of the company’s capital.

Aside from that, FuboTV reported cash and equivalents of $393.13 million by the end of 30 September and had $312.12 million in convertible notes that are due in 2026 which means that solvency risks are quite low.

Overall, Fubo’s latest moves are in line with the firm’s strategy. However, it is important to note that the company is still not cash flow positive and this means that it might have to raise more capital down the road to keep growing. Dilution risks remain elevated as a result of this situation.

That said, FuboTV stock is trading at only 2 times its forecasted sales for 2022. This makes the firm’s risk/reward profile very attractive, especially considering that the company has been rapidly growing its top-line performance and user base in the past quarters while its negative EBITDA margins have continued to shrink.

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