TV streaming platform operator for live sports, news, and entertainment content, fuboTV Inc. (FUBO), delivered record annual revenue and subscribers across its global business. But the company struggles to survive the challenging macro environment and continues to incur huge losses. Besides that, I will explain many other reasons why I am extremely bearish on this stock.

For the fourth quarter of fiscal 2022, FUBO’s revenue increased 36% year-over-year to $312.10 million in North America (NA) and 380% year-over-year to $7.2 million in the Rest of the World (ROW). Also, the company’s subscribers rose 29% year-over-year to 1,445,000 in NA and 117% year-over-year to 420,000 in ROW.

The sports-centric streaming company failed to convert its solid top-line growth into bottom-line performance. FUBO reported a net loss from continuing operations of $95.90 million in the fourth quarter. Its adjusted EBITDA loss widened from $73.40 million in the fourth quarter of 2021 to $75.40 million. Also, the company’s net loss and net loss per share came in at $152.08 million and $0.76, respectively.

Furthermore, FUBO issued a disappointing subscriber outlook for the fiscal year 2023. The company expects total subscribers to come in the 1.9-1.95 million range, only a slight increase from the 1.87 million it finished 2022 with.

On February 27, 2023, the company announced selling approximately 36.7 million shares of its common stock for aggregate gross proceeds of approximately $68.1 million. The shares were sold at negotiated discounts to the closing sale price of the common stock on the NYSE on February 24, 2023. This reflects that management desperately needs cash and is selling its shares at a significant discount.

Shares of FUBO have declined 45.2% over the past six months and 76.6% over the past year to close the last trading session at $2.00. The stock is currently trading 77.4% below its 52-week high of $8.83, which it hit on March 1, 2022.

Here is what could shape FUBO’s performance in the near term:

Deteriorating Financials

FUBO’s operating expenses increased 38.2% year-over-year to $319.32 million in the fiscal fourth quarter that ended December 31, 2022. The company reported an operating loss of $93.90 million. Its net loss from continuing operations was $95.92 million. Also, its net loss widened 35.8% from the year-ago value to $152.08 million.

Furthermore, the company reported a net loss per share of $0.76 for the fourth quarter. As of December 31, 2022, its cash and cash equivalents were $337.09 million, down 9.1% from the previous year. FUBO’s current liabilities stood at $438.75 million, compared to $337.30 million as of December 31, 2021.

Mixed Analyst Estimates

Analysts expect FUBO’s revenue for the first quarter (ending March 2023) to come in at $306.81 million, indicating an increase of 26.8% year-over-year. However, the company is expected to report a loss per share of $0.42 for the ongoing quarter. In addition, analysts expect the company to report a loss per share of $1.26 and $1.10 for fiscal 2023 and 2024, respectively.

Poor Profitability

FUBO’s trailing 12-month gross profit margin of negative 5.18% compares to the industry average of 49.63%. Likewise, its trailing 12-month EBITDA and net income margins of negative 45.62% and negative 56.69% stand out in contrast to the industry averages of 19.21% and 3.38%, respectively.

Moreover, the stock’s trailing 12-month ROCE, ROTC, and ROTA of negative 97.46%, 31.52%, and 41.12% compare to the industry averages of 3.73%, 3.93%, and 1.77%, respectively.

POWR Ratings Reflect Bleak Prospects

FUBO has an overall F rating, translating 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. In addition, it has an F grade for Stability. The stock’s 24-month beta of 2.34 justifies the Stability grade.

FUBO also has a D grade for Momentum. The stock is currently trading below its 50-day and 200-day moving averages of $2.19 and $3.08, respectively.

FUBO is ranked last in the 14-stock Entertainment-Sports & Theme Parks industry. The industry is rated D.

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

Bottom Line

Despite delivering record annual revenue and subscribers in its global business, sports-centric streaming service company FUBO suffers from a poor bottom-line performance. Furthermore, the company expects only minimal subscriber growth in 2023. Moreover, analysts expect the company to report massive losses for at least the next two fiscal years.

FUBO also continues to dilute shares and recently sold nearly 36.7 million shares at a discount. Given its massive losses, weak expected subscriber growth, continued share dilution, and poor profitability, it could be wise to avoid this stock.

Stocks to Consider Instead of fuboTV Inc. (FUBO)

The odds of FUBO outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these two B-rated (Buy) stocks from the Entertainment-Sports & Theme Parks industry instead:

Cedar Fair, L.P. (FUN)

Emerald Expositions Events, Inc. (EEX)

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FUBO shares were unchanged in premarket trading Tuesday. Year-to-date, FUBO has gained 14.94%, versus a 4.00% 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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