FUBO: Netflix vs. fuboTV: Which Streaming Stock is a Better Buy?

Netflix, Inc. (NFLX) and fuboTV Inc. (FUBO) are two of the world’s fastest-growing streaming service platforms. NFLX offers a variety of television (TV) series, documentaries, and feature films across a wide variety of genres and languages. FUBOs primarily a sports-first live TV streaming platform that also offers news and entertainment content.

As people are spending more time at home as a precautionary measure against coronavirus infection, both NFLX and FUBO have been witnessing significant growth in new subscribers and the total time spent by the users on their platforms.

NFLX has returned 180.4% over the past three years, while FUBO has gained 432% over the same period. In terms of year-to-date performance, FUBO is a clear winner with 455.6% returns versus NFLX’s 63.5%.

But which of these stocks is a better pick now? Let’s find out.

Latest Movements

On December 17, NFLX launched an audio-only mode that allows people to experience its content without seeing it. The feature is intended for users who want to listen to the audio only or save data.

The company also announced the rollout of new features for families, the Kids Activity Report and Family Profiles, on December 9. NFLX already has a provision for a ‘kids’ profile. NFLX is testing a ‘Family’ profile, which is focused on helping family members to find programs that can be watched together. NFLX also has plans to double its spending on original content in Asia next year.

The company appointed Zimbabwean telecoms billionaire Strive Masiyiwa to its board on December 17.

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On December 15, FUBO’s live TV streaming platform was launched on Hisense Smart TVs with the VIDAA Smart operating system. It is integrated with the Hisense remote control and fuboTV comes pre-installed in every model of the new Hisense 9602 smart TV, which is now available online and in stores. The company added EPIX to its live TV streaming platform, on December 11, which is a suite of premium entertainment networks featuring original programming and blockbuster movies.

As its first move into the online sports wagering market, FUBO acquired Balto Sports on December 1. And on October 27, the company announced an agreement with AT&T Inc.’s (T) SportsNet to broadcast it to its channel ahead of the start of the 2020/2021 NHL season. FUBO also announced in October that it has updated its popular Multiview feature on Apple Inc.’s (APPL) Apple TV. As a result, subscribers can now watch up to four channels simultaneously.

Recent Financial Results

NFLX’s revenue has surged 22.7% year-over-year to $6.4 billion for the third quarter ended September 30, 2020. Global streaming paid memberships increased 23.3% year-over-year to 195.15 million. The company has been expanding in the local originals segment to improve membership retention. In the APAC region, paid memberships have increased 62.2% year-over-year to 23.50 million, while its net income increased 18.8% year-over-year to $790 million. EPS increased 18.4% year-over-year to $1.74.

FUBO’s revenue for the third quarter ended September 30, 2020 increased to $61.2 million, driven by continued subscriber expansion, an increase in subscription average revenue per user (ARPU), and growth of advertising sales. Paid subscribers increased 58% year-over-year to 455,000. And ARPU increased 14% year-over-year to $67.70. Total content hours streamed by its users has increased 83% year-over-year to 133.3 million hours.

Expected Financial Performance

The market expects NFLX’s revenue and EPS to increase 18.2%, and 44.2%, respectively, next year. The market expects FUBO’s revenue and EPS to increase 78.8%, and 59.4%, respectively, next year.

Thus, FUBO has an edge over NFLX here.

POWR Ratings

While NFLX is rated “Buy” in our proprietary POWR Ratings system, FUBO is rated “Strong Buy”. Here are how the four components of overall POWR Rating are graded for both these stocks:

NFLX has an “A” for Trade Grade, and Industry Rank, and a “B” for Buy & Hold Grade, and Peer Grade. It is currently ranked #17 of 61 stocks in the Internet industry.

FUBO holds an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is currently ranked #3 of 15 stocks in the Entertainment – Sports & Theme Parks industry.

The Winner

Both NFLX and FUBO are good investment bets considering their market dominance and continued expansion. However, FUBO appears to be a better buy despite being a relatively new company, based on its higher revenue and earnings growth potential.

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FUBO shares were trading at $56.52 per share on Tuesday afternoon, up $7.04 (+14.23%). Year-to-date, FUBO has gained 534.70%, versus a 15.77% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...