fuboTV: Very Attractive Investment, Here's Why

seekingalpha2021-06-30

Summary fuboTV is better than it appears on the surface. All the good and bad points addressed. Why this stock is worthwhile buying at $5 billion market cap. mikkelwilliam/E+ via Getty Images ...

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Comments

Guardian_J
2021-07-24
Guardian_J
Go fubo
5福临门
2021-07-15
5福临门
繼續加油??
- Guardian_J:
  go fubo
sylarspock
2021-07-01
sylarspock
Video on demand is the way
Xuehao
2021-07-01
Xuehao
Gooo like n comment
- sylarspock:
  Done [Cool]
LucasBB
2021-07-01
LucasBB
Awesome
- Xuehao:
  like n comment
McWes
2021-07-01
McWes
Cool

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It's much more than an unprofitable streaming platform. It's an all-encompassing data, streaming, advertising, and betting company.\nThere's a lot of bad news thrown at fuboTV by those that are intent on misunderstanding the opportunity. Stay with me, as I attempt to, in a balanced manner, note the good and the bad about fuboTV.\nWhat's fuboTV?\nfuboTV is a 6-year-old company. It's a streaming platform at its core. But it also has some interesting side units being deployed. What attracts subscribers to its platform in the first instance is its streaming for live sports events.\nHowever, this side of the business will realistically never be profitable. For the foreseeable future, fuboTV has to acquire the rights from ESPN (DIS) and Comcast (CMCSA).\nSimply said, the rights to acquire the sporting content are so high, as obviously ESPN and others don't want to lose any unit economics by having subscribers fleeing away from their own platform. So the price for the content is prohibitively high.\nSo what everyone has come to understand is that fuboTV's streaming business will never be meaningfully profitable,and that's as far as everyone is willing to look.\nWhat investors are failing to understand is that fuboTV's streaming operationis a customer acquisition strategy. It offers high-resolution live sporting streaming so that it can notonly benefit from the ''cord-cutting''tailwinds as households churn out of pay-TV services but can also show subscribers ads.\nThis side of the operation,the data-driven advertising segment, is the segment that will in time drive fuboTV's profitability. I'm referring to the programmatic advertising platform. This is incredibly profitable compared with direct ad spend.\nSo many investors miss that. And those that do vaguely understand its advertising segment, and how it compares with Roku (ROKU), go on to proclaim that this is only 12% of the business and that it won't ever be a needle-moving segment for fuboTV.\nAgain, this misses the fact that fuboTV's advertising segment is growing at such a rapid clip. During its most recent quarter, fuboTV's advertising segment was up 206% y/y. Even as fuboTV dramatically decelerates over time, I suspect that by the end of Q4 2021 (six months), fuboTV's advertising segment will account for about 15% of its business.\nWhat's more, it's entirely possible that by this time next Summer, fuboTV's advertising segment will account for approximately 20% of fuboTV. At which point, investors will start to give fuboTV's advertising opportunity slightly weightier considerations.\nI believe that if this is all there was to fuboTV, the stock right now at $4 billion would probably be fairly valued. But then, we have another opportunity that I've called the wildcard. More on this later.\nRevenue Growth Rates Continue to Impress\nSource: Q1 2021ShareholderLetter\nAs you can see above, fuboTV is growing at a very strong clip. It's difficult at this stage to know what 2022 will look like, but given fuboTV's trajectory of beating estimates, I suspect that the company will grow next year by at least 60% y/y to at least $860 million.\nFor fuboTV to grow at 60%, that would imply quite a substantial slowdown from the 101% revenue growth rates aimed at in 2021. However, given that fuboTV's betting segment will start in earnest in 2022, I contend that growing at 60% y/y in 2022 will turn out to be an easy feat for fuboTV.\nThe Wildcard Discussed\nIn Q4 2021, in approximately 4 months' time, fuboTV is going to soft launch its Sportsbook. This is the start of its betting segment. And this is what I believe could drive the stock's upside potential.\nSo far, the details are sketchy. The idea is that when sporting fans are watching their favorite team, rather than having to go elsewhere to bet on the result, they could do it seamlessly via fuboTV.\nI know from experience that this already happens in the UK via adverts in the interval of key TV games, but this way, there's the potential for fuboTV to leverage the data they have on the viewer, and their preferences, to drive further monetizations and engagement.\nIf you think about it, viewers watching their favorite team are more likely to bet if it is something that iscompelling to them. And that's the advantage of having 1st-party data on the viewer. fuboTV will know what the viewers' preferences are and this will drive down user churn.\nAgain, this all circles back to having data on the viewer. During aninterviewyesterday, CEO David Gandler discusses a way of bringing down user friction. That fuboTV wants to find a way to deliver highly personalized betting odds about what the viewer is watching on fuboTV in real-time to viewers' phones. They haven't quite figured out how to optimize their app, but the team is working on this right now.\nValuation - Very Attractively Priced\nOn the surface, the stock is cheap at approximately 5x its 2022 revenues. But as you know, fuboTV's profitability margins are dismal. There's nobody out there that doesn't already know this.\nPresently, the bulk of the company's business is its subscription business. This subscription business accounts for about 85% of the business right now, and this is unprofitable. fuboTV aims to get this side of the business to break even. This is similar to Roku's (ROKU) hardware business in the early stages.\nThen, the opportunity will be to leverage their huge subscriber base to grow their data-driven advertising metrics. During the call yesterday, Gandler once again reiterated that advertising is likely to perform strongly in Q2 through Q4.\nLast year, Roku's advertising segment gross margins hovered around56% to 60%, although this latest quarter, Q1 2021, it soared to 70% gross margins. This gives investors some idea as to what fuboTV may also strive to. Obviously, Roku is a much bigger business than fuboTV, but it's something that fuboTV could migrate towards in time.\nThe Bottom Line\nAfter you've read this article, I would like to believe that you have a more nuanced interpretation of what fuboTV is today and where it's headed over the coming twelve months.\nWhen you think about fuboTV, I would like you to think about its ability to harness its first-party data. With this, you can obviously level advertising and drive profitability, but I suspect that you'll be able to drive some level of betting too.\nI will not deny that this journey has been a challenging one and that this investment has not been for those faint-hearted. Happy investing!","kind":null,"is_publish_news":false,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":174140252,"gmtCreate":1627087726876,"gmtModify":1703483939366,"author":{"id":"3577512169946317","authorId":"3577512169946317","name":"Guardian_J","avatar":"https://static.tigerbbs.com/d5732d3790ba7ded4910ae093423ed15","vip":1,"crmLevel":6,"crmLevelSwitch":1},"htmlText":"Go fubo","listText":"Go fubo","text":"Go 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