fuboTV Inc. (FUBO - Get Rating) is a television streaming platform for live sports, news, and entertainment content. Its fuboTV platform allows customers to access content through streaming devices and on SmartTVs, computers, mobile phones, and tablets. The company operates through two segments: streaming and online wagering.

FUBO management aims to achieve positive cash flow and AEBITDA by 2025. Although the company focuses on reducing cash burn, FUBO’s North American subscription revenue in the last reported quarter grew 70% year-over-year, while its ad revenue increased 32% year-over-year.

Despite the fall in crude prices, the August consumer price index (CPI) rose to 8.3%, slightly higher than estimated. With inflation remaining near the multi-decade high, the Fed is expected to continue aggressive interest rate hikes until it achieves its long-term inflation target of 2%.

This is expected to keep the stock market volatile, especially putting pressure on growth stocks like FUBO. In this uncertain macroeconomic environment, FUBO’s cash-burning could pose a significant threat to its existence.

The company has reduced its North America (NA) segments’ revenue and subscribers’ guidance for fiscal 2022. FUBO now expects its revenue for the NA 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 1,330-1350K, down from 1,465-1,485K guided at the end of the first quarter.

Last month, Wedbush downgraded FUBO to neutral from outperform. Wedbush analyst Michael Pachter said, “Despite all of the company’s bold targets replayed at its investor day, fuboTV needs to raise capital and cut cash burn rapidly, or it will be out of cash within a year.” “While we are confident that they can do both, it is uncertain how dilutive the capital raise will be and how rapidly their cash burn will improve,” he added.

The stock has declined 71.3% in price year-to-date and 83.8% over the past year to close the last trading session at $4.43. It is trading 87.3% below its 52-week high of $35.10, which it hit on November 4, 2021.

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

Weak Financials

FUBO’s operating loss widened 38.8% year-over-year to $112.52 million for the second quarter ended June 30, 2022. The company’s adjusted net loss widened 60.7% year-over-year to $82.51 million. Its total operating expenses increased 57.8% year-over-year to $334.41 million.

In addition, its adjusted EBITDA loss widened 67% year-over-year to $79.11 million. Also, its adjusted loss per share widened 21.6% year-over-year to $0.45.

Mixed Analyst Estimates

FUBO’s EPS for fiscal 2022 and 2023 is expected to remain negative. Its revenue for fiscal 2022 and 2023 is expected to increase 48.6% and 31.8% year-over-year to $948.50 million and $1.25 billion, respectively. It failed to surpass Street EPS estimates in three of the trailing four quarters.

Weak Profitability

FUBO’s trailing-12-month gross profit margin is negative compared to the 50.52% industry average. Likewise, its trailing-12-month net income margin is negative compared to the 5.80% industry average. Also, its trailing-12-month EBITDA margin is negative compared to the 19.57% industry average.

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 weak profitability.

It has an F grade for Stability, consistent with its 3.27 beta.

FUBO is ranked last out of 16 stocks in the D-rated Entertainment – Sports & Theme Parks industry. Click here to access FUBO’s ratings for Growth, Value, Momentum, and Sentiment.

Bottom Line

FUBO’s cash burn is a matter of concern, with the company not expecting positive cash flow and AEBITDA until 2025. The company is still far from turning profitable. It has also lowered its guidance for the current year.

Given its weak financials and profitability, it could be wise to avoid the stock now.

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

FUBO has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in other Entertainment – Sports & Theme Parks stocks with a B (Buy) rating, such as Endeavor Group Holdings, Inc. (EDR - Get Rating), Vivid Seats Inc. (SEAT - Get Rating), and SeaWorld Entertainment, Inc. (SEAS - Get Rating).

FUBO shares fell $0.15 (-3.36%) in premarket trading Monday. Year-to-date, FUBO has declined -72.29%, versus a -18.87% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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