Streaming service provider fuboTV Inc. (FUBO - Get Rating) in New York City operates a live TV streaming platform for sports events, news, and entertainment content in the United States and Europe. The company reached the one million subscriber milestone in the third quarter, indicating its solid position in the business. FUBO reported a 113% year-over-year increase in viewership hours, hitting record highs with fuboTV customers streaming 284 million hours of content during the third quarter. Furthermore, its total paid subscribers were up 108% year-over-year during the quarter.

“The one million subscriber milestone represents an exciting inflection point in our business, with tremendous implications for revenue growth and profitability, particularly given the continued strength of our advertising business,” said Edgar Bronfman Jr., executive chairman, fuboTV, in a released statement.

However, the release failed to impress investors. The stock has declined 26.7% in price since the company reported its third-quarter financial results and surge in subscribers on November 9. FUBO shares have lost 12.4% year-to-date to close yesterday’s trading session at $24.55. The stock is currently trading below its 50-day and 200-day moving averages of $27.96 and $26.88, respectively. The stock has a 3.10 beta, which indicates high volatility.

Despite registering triple-digit top-line growth, the company’s weak bottom line is a concern. Its net loss attributable to common stockholders was $105.85 million, while its adjusted EPS was negative $0.59. Also, the Street expects FUBO’s EPS to remain negative at least until the next year.

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

Negative Bottom-Line

FUBO’s total revenues increased 156% year-over-year to $156.69 million in its fiscal third quarter, ended September 30. However, its operating loss was  $103.26 million, down 65.8% from the same period last year. In addition, its adjusted net loss and adjusted loss per share came in at $84.42 million and $0.59, respectively. Its adjusted EBITDA was negative $81.26 million, reflecting a 71.2% decline from its year-ago value of $47.47 million. Also, its trailing-12-months net operating cash flow and levered cash flow were  negative $219.60 million and $137.82 million, respectively.

Stretched Valuation

In terms of forward EV/Sales, FUBO is currently trading at 5.59x, which is 116.5% higher than the 2.58x industry average. Also, its 5.72 forward Price/Sales ratio is 229.5% higher than the 1.74 industry average. Also, FUBO’s 7.97x forward Price/Book is 187.7% higher than the 2.77x industry average.

Poor Profitability

FUBO’s negative 0.44% gross profit margin is substantially lower than the 51.66% industry average. Its 0.77% CAPEX/Sales is 80% lower than the 3.82% industry average. Furthermore, FUBO’s negative 167.16%, 37.81%, and 28.07% respective ROE, ROA, and ROTC compare with the 9.87%, 3.01%, and 4.29% industry averages.

POWR Ratings Reflect This Bleak Prospects

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

The stock has a grade F for Quality, which is consistent with its lower-than-industry profit margins.

FUBO has a D grade for Value. Its stretched valuation justifies this grade.

Of the 15 stocks in the F-rated Entertainment – Sports & Theme Parks industry, FUBO is ranked #14.

Beyond what I have stated above, one can also view FUBO’s grades for Sentiment, Growth, Momentum, and Stability here.

View the top-rated stocks in the Entertainment – Sports & Theme Parks industry here.

Bottom Line

FUBO saw a large influx of subscribers in the third quarter, and management increased revenue and subscriber guidance for the full year 2021. However, the company’s negative bottom line is a concern. Also, considering FUBO’s lofty valuation and negative profit margins, we think the stock is best avoided now.

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

While FUBO has an overall POWR Rating of F, one might want to consider investing in its industry peer, Six Flags Entertainment Corporation New (SIX - Get Rating), having a B (Buy) rating.

FUBO shares fell $0.14 (-0.57%) in premarket trading Tuesday. Year-to-date, FUBO has declined -12.32%, versus a 26.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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