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

Despite growth in subscribers and revenues in its global streaming business, FUBO reported a net loss of $152.75 million in the third quarter of fiscal 2022. This amounted to an abysmal and seemingly insurmountable 67.9% of its quarterly revenue.

FUBO decided to pare its losses by closing Fubo Gaming and ceasing operations of Fubo Sportsbook, consequently incurring a non-cash impairment charge of $35.5 million pertaining to intangible and other long-lived assets associated with the segment.

To recoup its losses, FUBO raised additional capital by issuing 31% percent more shares as of September 30, 2022, compared to the tally at the end of the previous-year quarter.

We take a look at whether these measures are enough to justify the recent uptick in the stock’s volumes on the bourses.

Dismal Financial Performance

During the third quarter of the fiscal year 2022, ended September 30, FUBO’s operating loss widened 45.6% year-over-year to $150.33 million, while its adjusted EBITDA loss widened 14.1% year-over-year to $92.72 million. As a result, the company’s adjusted net loss also worsened by 12.3% year-over-year to $94.84 million.

FUBO’s total assets stood at $1.27 billion as of September 30, 2022, compared to $1.37 billion as of December 31, 2021. The company’s total liabilities stood at $806.48 million as of September 30, 2022, compared to $698.90 million as of December 31, 2021.

Poor Profitability

FUBO has a trailing 12-month gross profit margin of negative 5.18%, compared to the industry average of 50.32%. Its trailing 12-month EBITDA and net income margins of negative 45.62% and negative 56.69% also stand out in stark contrast to the industry averages of 18.95% and 4.51%, respectively.

Moreover, in terms of the trailing 12-month ROCE, ROTC, and ROTA, FUBO significantly underperforms relative to the industry averages of 5.81%, 3.83%, and 2.23%, respectively.

Unfavorable Analyst Estimates

Analysts expect FUBO’s loss per share for the fourth quarter of the fiscal ended December 2022 to remain flat, compared to the previous year-quarter, at $0.57. The company’s loss per share for the entire fiscal is expected to widen by 20.4% year-over-year to $2.36. Moreover, it is expected to keep reporting losses until at least fiscal 2024.

FUBO has missed consensus EPS estimates in two of the trailing four quarters.

Price Action Reflects Bearishness

Due to its recent popularity, FUBO’s stock has gained 5.1% over the past month to close the last trading session at $2.25.

Despite the recent gain, the stock is still trading below its 50-day and 200-day moving averages of $2.51 and $3.46, respectively.

POWR Ratings Reflect Weakness

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

Our proprietary rating system also evaluates each stock based on eight different categories. FUBO also has an F grade for Stability, in sync with its beta of 2.33. Moreover, its poor profitability and bearishness in price action are reflected in grade F for Quality and Momentum.

FUBO has a D grade for Sentiment in concurrence with the unfavorable analyst estimates. Unsurprisingly, it is ranked last among 14 stocks in the Entertainment – Sports & Theme Parks industry.

Beyond what has been discussed above, additional ratings for the Growth and Value of FUBO can be found here.

Bottom Line

Despite FUBO’s increasing revenues, an absence of its own channel or content means that fees paid to network companies for broadcasting rights claim much of that revenue. This compels FUBO to subsist on paper-thin margins.

Moreover, the lack of product differentiation and mixed responses to additional revenue streams also makes those margins vulnerable and volatile in the face of increased competition, persistently-high inflation, and progressively increasing borrowing costs.

While raising additional capital by issuing shares does buy FUBO time and scope to engineer a turnaround, dilution of existing shareholders’ stake means that returns on investment would diminish significantly even if the company manages to turn its fortunes around.

Hence, in view of its weak fundamentals and an increasingly uphill path to profitability, it may be wise to avoid buying the stock until its prospects become clearer.

How does fuboTV Inc. (FUBO) Stack up Against Its Peers?

FUBO has an overall POWR Rating of F, which equates to a Strong Sell. Hence, you might consider looking at its Entertainment – Sports & Theme Parks industry peers, Endeavor Group Holdings, Inc. (EDR - Get Rating), Cedar Fair, L.P. (FUN - Get Rating), and Emerald Expositions Events, Inc. (EEX - Get Rating), with a B (Buy) rating.

FUBO shares were trading at $2.16 per share on Wednesday afternoon, down $0.09 (-4.00%). Year-to-date, FUBO has gained 24.14%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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