It's not difficult to understand why shares of streaming television name fuboTV (FUBO) have been upended since peaking in late 2020. The COVID-19 pandemic essentially trapped millions of people at home, giving them time and reason to shop around for cost-effective entertainment. Investors responded, only recognizing after the fact that this company still faces enormous challenges ... including the cord-cutting headwind that's blowing against more traditional cable players like Comcast's Xfinity and Charter's Spectrum.
There's a handful of overlooked nuances, however, that make this ticker a speculative buy in the shadow of a major, multiyear pullback.
fuboTV: The same, but different
Don't misread the message. fuboTV isn't a great fit for everyone's portfolio at this time. The stock is trading down about 97% from its all-time high reached not long after it IPO'd in October 2020. It's probably not even safe enough for most people's portfolios. If you're a speculator who can stomach the risk though, there's a bullish case to be made.
But first things first. On the off chance you're reading this and aren't familiar with it, fuboTV is a streaming television platform. It offers most of what you'd expect from traditional cable service, plus a respectable on-demand library. It's decidedly sports-oriented, however, offering a robust lineup of sports programming like NFL Network, professional team-specific channels, and a wide range of soccer matchups that aren't otherwise readily accessible to U.S. fans.
It's also cheaper than cable, even if only by virtue of sidestepping the local fees and taxes you typically find on monthly bills for more conventional cable service.
It hasn't seemed to matter much of late. While fuboTV's legal argument was likely at least part of the reason Walt Disney, Fox, and Warner Bros. Discovery were blocked from co-launching a sports-centric streaming service in August, competitors keep coming. More and more sports events are showing up on streaming platforms anyway, for instance, like Netflix's live airing of the fight between Mike Tyson and Jake Paul. And Disney intends to launch a stand-alone streaming version of ESPN sometime in the latter half of the coming year, continuing to chip away at the top reason consumers keep paying sky-high cable bills.
The thing is, fuboTV's service appears to be appealing enough as well as affordable enough to keep drawing a crowd. The company's customer count rolled in at a third-quarter record of just under 2 million for the three-month stretch ending in September, in front of forecasts of a record-breaking headcount of 2.03 million for the quarter now underway. Most of its customers and the bulk of its growth come from its full-price cable alternative, as opposed to its smaller, (much) lower-priced rest-of-world service.
Data source: Fubo Inc. Chart by author. Numbers are in thousands.
And it's not just fuboTV, by the way. Even without the same sports focus, streaming television services like Walt Disney's Hulu+Live and Alphabet's YouTube TV are also still adding to their paying customer bases. Consumers are finding this option to be an acceptable alternative to conventional cable.
But that's only part of the reason to take a speculative shot on fuboTV stock while it's down as much as it is.
On somebody's acquisition radar?
One should always be wary of stepping into any stock simply because it's a potential acquisition target. Many -- if not most -- of these assumptions don't pan out as expected.
On the flip side, savvy investors are always paying attention. That is to say, you should notice what's happening within an industry, figure out why it's happening, and then determine how that underlying trend applies to a particular company.
And right now within the entertainment industry, companies are shoring up their businesses with divestitures (like the one Comcast is mulling with certain cable channels), partnerships (like the one Disney, Fox, and Warner recently attempted), and acquisitions.
Case(s) in point: Walmart recently completed its acquisition of TV manufacturer Vizio, widening its role as a media middleman. And, although it ended up being canceled before being consummated, AT&T's DirectTV and Echostar's rival satellite cable name Dish Network were recently intended to merge. Let's also not forget that earlier this month Needham suggested streaming technology outfit Roku is a buyout candidate by a company on the hunt for an established brand name in the connected TV space with a base of 85.5 million regular users of its platform.
In other words, with organic growth now drying up, media outfits are exploring other options. Dealmaking is arguably the next best bet for many of them.
FUBO Revenue (Quarterly) data by YCharts
That's not a guarantee -- or even a confident prediction -- that unprofitable fuboTV will inspire a suitor to make an official offer anytime soon. The argument does hold some water though. The entirety of the company's operation, brand name, and its 2 million customers can currently be bought for less than $600 million. The company's total liabilities are just a little more than that amount, with practically none of that being long-term debt. By entertainment stock standards (or any stock's standards) that's a bargain, if the buyer knows it can do something constructive with the target.
And yes, eliminating a legitimate streaming television competitor is arguably a constructive choice, even if such a deal is made at a much higher price than fuboTV stock's current one.
High risk, high reward
Again, a prospective buyout alone is a lousy reason to own any company; the rumors don't seem to come to fruition as often as investors may like. You first and foremost own a piece of a company because it's got a compelling future. You buy its stock when this bright future isn't fully reflected in its price.
The prospect of a company becoming the beneficiary of an industrywide acquisition spree or partnership stampede, however, certainly bolsters an existing bullish argument.
fuboTV cautiously fits that bill right now, particularly given that it's on track to swing to a profit sometime in 2027, and that the analyst community's current consensus target of $2.38 is 40% above the stock's present price. If you can stomach the risk, that wouldn't be a bad spot to open a new position in this admittedly speculative ticker.
