Television streaming company fuboTV Inc. (FUBO) offers subscribers access to live sports, news, and entertainment content. It operates through two segments: streaming and online wagering. Its fuboTV platform enables customers to access content through streaming devices, smart TVs, mobile phones, tablets, and computers.

The August consumer price index (CPI) increased 8.3% year-over-year, higher than expected. With inflation hovering around its highest levels since the early 1980s, the Federal Reserve recently raised benchmark interest rates by another 75 basis points and indicated more aggressive rate hikes this year. As the Fed might deliver more jumbo-size rate hikes, the odds of a recession are increasing.

The Fed’s aggressive monetary policy stance and growing recession odds are expected to keep the stock market under immense pressure in the near term. Amid an uncertain market environment, investors are increasingly shunning unprofitable, speculative growth stocks like FUBO.

Sports-focused streaming and wagering company FUBO achieved solid growth in subscribers and revenue in the fiscal 2022 second quarter, with North American subscriber growth of 41% year-over-year and total revenue growth of 65% year-over-year. 

In addition, its ad revenue grew 32% year-over-year to $21.70 million. The company also aims to achieve positive cash flow and AEBITDA by 2025.

However, the company has reduced its North America segments’ revenue and subscribers’ guidance for fiscal 2022. 

FUBO now expects its revenue for the North America segment to come in between $910 million and $930 million, down from $1,020-1,030 million, while its subscribers are expected to come in the range of 1,330,000 and 1,350,000, down from 1,465,000-1,485,000 guided at the end of the first quarter.

Furthermore, in August, Wedbush analyst Michael Pachter cited concerns over the TV streaming company’s near-term performance and downgraded the stock. “Slowing subscriber growth, fierce competition, inflation, and rising content costs all make us less confident over the near term. We see a lot of uncertainty embedded in guidance,” Pachter wrote in a research note.

According to the Wedbush analyst, although the company set bold targets for 2025 on its investor day, it is expected to run out of cash within a year. He stated that it’s “uncertain how dilutive the capital raise will be and how rapidly their cash burn will improve.”

FUBO’s stock has plummeted 74.3% in price year-to-date and 83.4% over the past year to close the last trading session at $4.00. It is currently trading 88.6% below its 52-week high of $35.10, which it hit on November 4, 2021.

Here is what I think could influence FUBO’s performance in the upcoming months:

Weak Financials

For the second quarter of fiscal 2022 ended June 30, 2022, FUBO’s total operating expenses increased 57.8% year-over-year to $334.41 million. Its operating loss widened 38.8% year-over-year to $112.52 million. Also, the company’s adjusted net loss came in at $82.51 million, worsening 60.7% from the prior-year period.

Furthermore, the company adjusted EBITDA loss widened by 67% year-over-year to $79.11 million. Also, its adjusted loss per share worsened by 21.6% from the year-ago value to $0.45.

Unfavorable Analyst Estimates

Analysts expect the company’s loss per share of $0.65 for the current quarter (ended September 2022) to worsen by 9.4% from the prior-year quarter. Likewise, the loss per share estimate of $2.53 for the current year (ending December 2022) reflects a widening of 29% from the previous year.

Low Profitability

FUBO’s trailing-12-month gross profit margin of a negative 4.98% compared to the industry average of 50.52%. Its trailing-12-month EBITDA margin and net income margin of a negative 47.81% and 55.73% are significantly lower than their respective industry averages of 18.63% and 5.73%.

In addition, the stock’s trailing-12-month levered FCF margin of a negative 16.58% is lower than the industry average of 8.01%. Its trailing-12-month ROCE, ROTC, and ROTA of a negative 77.23%, 28.30%, and 34.85% compared to the industry averages of 6.66%, 3.58%, and 2.47%, respectively.

POWR Ratings Reflect Bleak Prospects

FUBO has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. FUBO has an F grade for Quality, in sync with its lower-than-industry profitability metrics. Also, it has an F grade for Stability, consistent with its beta of 1.88.

FUBO is ranked last out of 16 stocks in the D-rated Entertainment – Sports & Theme Parks industry.

Beyond what I have stated above, we have also given FUBO grades for Value, Growth, Momentum, and Sentiment. Get access to all the FUBO Ratings here.

Bottom Line

While FUBO has set bold targets at its investor day, including achieving positive free cash flow and AEBITDA margin of 15% by 2025, the company is still far from turning profitable, and its cash burn remains a significant threat to its profitability. Furthermore, it has lowered its guidance for the current fiscal year.

As the stock market is expected to remain volatile in the foreseeable future, we think it could be wise to avoid this unprofitable growth stock now.

How Does fuboTV Inc. (FUBO) Stack Up Against Its Peers?

FUBO has an overall POWR Rating of F. One could also check out Endeavor Group Holdings, Inc. (EDR) within the Entertainment – Sports & Theme Parks industry with a B (Buy) rating.

FUBO shares rose $0.01 (+0.25%) in premarket trading Friday. Year-to-date, FUBO has declined -74.23%, versus a -20.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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