Sports-first live television (TV) streaming platform provider fuboTV Inc. (FUBO) had an impressive stock market debut last October, raising $183 million. The stock has gained 31.1% over the past three months on the back of investors’ optimism surrounding positive developments. The Fubo Sports Network is expected to premiere the first season of Getcha Popcorn Ready with T.O. and Hatch and season two of No Chill with Gilbert Arenas on August 22. 

However, FUBO has lost 41.8% over the past six months and 4.5% year-to-date to close yesterday’s trading session at $26.74. Furthermore, it is currently trading 57.1% below its $62.29 all-time high, which it hit on December 22, 2020.

While New York City-based FUBO operates across the United States, Canada, and Spain, streaming giant Netflix, Inc. (NFLX) has a presence in more than 190 countries worldwide. Also, hedge fund sentiment toward the stock has declined lately, and FUBO has yet to turn a profit. So, the stock’s near-term prospects look bleak.

Here’s what we think could influence FUBO’s performance in the near term:

Upcoming Launch of Fubo Sportsbook

FUBO is expected to launch Fubo Sportsbook in the fourth quarter. It gave  a preview of the platform’s holistic and hyper-personalized betting experience on an earnings call on August 10. Also, on July 15, the company’s subsidiary, Bufo Gaming, and The Cordish Companies, announced the completion of a market access agreement for Fubo Sportsbook in Pennsylvania.

However, because  the sports wagering market is growing, Fubo Sportsbook is expected to face  intense competition from other established players in this space, such as DraftKings Inc. (DKNG), Penn National Gaming, Inc. (PENN), and Caesars Entertainment, Inc. (CZR). So, FUBO’s pace of growth in the sports wagering space looks uncertain.

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the second quarter, ended June 30, 2021, FUBO’s total revenues increased 196.3% year-over-year to $130.88 million. The company’s subscribers grew 15% sequentially to 681,721. However, its total operating expenses increased 90.2% year-over-year to $211.95 million. Its operating loss for the quarter increased 20.5% year-over-year to $81.07 million, while its net loss came in at $94.93 million, up 29% year-over-year. Also, FUBO’s loss per share was  $0.68, versus $2.08 in the year-ago period.

Poor Profitability

In terms of forward trailing-12-month gross profit margin, FUBO’s negative 2.66% is significantly lower than the 50.48% industry average. Likewise, the stock’s trailing-12-month ROCE, ROTC, and ROTA are negative compared to the 8.48%, 4.17%, and 2.38% respective industry averages. Its trailing-12-month net income margin is also negative versus  the 5.46% the industry average.

POWR Ratings Reflect Bleak Outlook

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. Among these categories, FUBO has a D grade for Stability, which is consistent with its beta of 2.88.

The stock has a D grade for Value. This is justified given FUBO’s 6.99x and 6.84x respective forward EV/S and P/S, which are  higher than the 2.64x and 1.71x  industry averages.

Also,  FUBO has an F grade for Quality, which is in sync with its lower-than-industry profitability ratios. It has an F grade for Sentiment also, consistent with unfavorable analyst sentiment.

FUBO is ranked #13 of 14 stocks in the F-rated Entertainment – Sports & Theme Parks industry. Click here to access the additional POWR Ratings for FUBO (Growth and Momentum).

Bottom Line

Even though FUBO is making several advances in the sports wagering front, it is uncertain if the company will be able to gain sufficient market share amid intense competition from other top players. The stock is currently trading lower than its 50-day and 200-day moving averages of $27.83 and $28.57, respectively, indicating that it is in a downtrend. Furthermore,  analysts expect its EPS to remain negative in its fiscal years 2021 and 2022. So, we think it’s wise to avoid the stock now.

How Does fuboTV (FUBO) Stack Up Against its Peers?

FUBO currently has an overall POWR Rating of F. So, one  might want to consider looking at its industry peer SeaWorld Entertainment, Inc. (SEAS), which has a B (Buy) rating.

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