FuboTV Stock Down 28% in March – Time to Buy FUBO Stock?

The price of FuboTV stock has gone down 28% so far this month after the company reported a slightly wider-than-expected net loss in the fourth quarter of the 2021 fiscal year.

During the three months ended on 31 December, FuboTV reported total revenues of $231.1 million resulting in a 120% year-on-year increase as its number of subscribers increased 140% compared to the previous year at 1.32 million (including acquisitions). This top-line figure exceeded Wall Street’s estimate by around $19 million.

Subscription revenues accounted for most of Fubo’s revenues. However, advertising income nearly doubled at $26.1 million during the period to end the 2021 fiscal year at $73.75 million as the company continues to work to diversify its revenue streams.

The number of hours streamed went up 101% on a year-on-year basis while average revenues per user climbed 8% compared to Q4 2021 at $74.52.

GAAP operating losses for the period stood at $110 million compared to $92.3 million reported by the firm in Q4 2021 while net losses ended the quarter at $111.96 million compared to $167.83 million the firm shed during the same period a year ago.

Both the firm’s negative net and adjusted EBITDA margins shrunk by 13,743 and 563 basis points respectively as the company keeps improving its bottom-line profitability progressively.

Finally, FuboTV’s quarterly adjusted losses per share ended the period at $0.57 compared to $0.39 the firm shed a year ago on a fully diluted basis. This figure exceeded Wall Street’s consensus estimate by 1 cent.

For the upcoming first quarter of the 2022 fiscal year, the company expects to produce up to $237 million in revenue while full-year revenues are estimated to land at $1.09 billion. Both of these estimates were in line with the Street’s forecasts.

Meanwhile, Fubo expects to increase its subscriber base in the United States and Canada to 1.51 million in 2022 and 280,000 in the rest of the world.

Today, FuboTV’s management will be participating in the Deutsche Bank Annual Media, Internet & Telecom Conference. During this event, the company’s top executives will host one-on-one and small group meetings with institutional investors that could lead to fluctuations in the stock price.

What could be expected from this growth stock in the next weeks or months? In this article, I’ll be assessing the price action and fundamentals of FuboTV stock to outline plausible scenarios for the future.

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FuboTV Stock – Technical Analysis

The price of FuboTV stock has declined sharply since November last year as market sentiment toward growth and tech stocks has deteriorated amid an expected shift in macroeconomic conditions.

In this regard, some instability in the bond market prompted by higher inflation readings in the United States has led to a climb in US Treasury yields. Thus far, the 10-year yield is standing above 2% – its highest level since the pandemic started.

Companies with weak fundamentals and relatively immature business models tend to suffer the most when the market adopts a risk-off attitude and that is one of the main reasons why the price of FuboTV stock has dropped.

Right now, FuboTV is trading 82.4% below its 52-week high and 72.2% below its 200-day simple moving average. This indicates the strength of the negative momentum that the stock is experiencing.

A falling wedge pattern has formed as a result of the decline that started in November and FUBO is now tagging a relevant horizontal support area at $6 per share.

If the price breaks below this threshold, the downside risk for the stock would be quite high as the next area of support is found at $3 per share.

Momentum indicators are favoring a short-term bullish outlook as they have been making higher lows lately. However, the Relative Strength Index (RSI) is still sitting in bearish territory at 29 while the MACD is negative as well.

FuboTV Stock – Fundamental Analysis

FuboTV’s growth in the past three years has been remarkable. Revenues have moved from $146.5 million to $638.4 million from 2019 to 2021 while the company expects to generate $1.09 billion in revenue this year.

The same goes for the number of subscribers, which has moved from 316,000 to 1.32 million during that same period and it is expected to climb to 1.79 million this next year.

The company has also been working in developing other revenue streams including advertising and sports betting, both of which remain potential growth drivers in the future.

That said, the company has been a bit slow at producing positive bottom-line profitability as, even though losses have been declining as a percentage of revenue, net losses and negative adjusted EBITDA margins stood at 60% and 40.4% respectively last year.

By the end of the year, Fubo reported long-term debt of around $350 million on total assets of $1.37 billion including $630.3 million in goodwill, $218.19 million in intangible assets, and $374.3 million in cash and equivalents.

During that period, the company burned around $245 million in cash. This means that the business might need to raise more capital down the road to keep expanding as FuboTV has to keep buying rights and licenses to stream content.

Even though solvency is not a concern as long-term borrowings are primarily convertible notes, dilution risks seem high at the moment and that could be weighing on the valuation of the company as investors fear that the latest acquisitions and the next steps taken by the management to expand the firm’s content offering could force FuboTV to issue additional common shares.

That said, FuboTV is trading at less than 1 time the firm’s forecasted revenues for 2022. Considering the rapid pace at which the company is growing, Fubo can be considered a potential acquisition target for a large media company.

If that happens, the upside potential for the stock could be considered high if the price paid is somewhere around FuboTV’s November highs of $30 per share or so. Even though the odds of such a deal happening are uncertain, it is a scenario to consider based on the positive track record and prospects of this sports streaming business.

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