Sports-centric live TV streaming company FuboTV (FUBO 6.25%) started 2025 on a high note. The company announced a deal in early January to merge with Walt Disney's (DIS 0.25%) Hulu + Live TV. Once merged, the entity would be roughly 70% owned by Disney but remain public under the FuboTV name and ticker. It would own both streaming services but operate them independently. They have 6.2 million subscribers between them.
The merger also ended the litigation between FuboTV and Disney related to anti-competitive practices in the sports media landscape. Partnering with Disney, which owns the ESPN sports media empire, seems like a natural fit for FuboTV.
Since the announcement, FuboTV stock has more than doubled to over $3 per share. However, the deal isn't fully finalized yet. It's unclear whether regulators will allow the deal, and the financial implications for FuboTV will vary depending on whether it closes.
Should investors buy, sell, or hold FuboTV stock in 2025? Here is what you need to know.
Disney's backing gives FuboTV a needed boost
FuboTV doesn't have the same business model as Disney or Netflix. Those two companies own a significant portion of the content they distribute, whereas FuboTV does not. Thus, FuboTV has struggled to make money. Its licensing costs consume approximately 80% of its revenue, leaving little for other expenses, such as advertising or overhead.
The Disney deal provides two primary benefits. First, it gives FuboTV access to Disney's sports media assets, namely ESPN and its associated channels. Fubo would get a new carriage agreement with Disney that would allow it to create a new sports and broadcasting service. Secondly, the new-look parent company would leverage its 6.2 million combined subscribers to negotiate carriage deals with other media companies. That should help FuboTV land cheaper licensing rights and lower its costs.
Additionally, there are direct cash infusions for FuboTV, which had approximately $161 million in cash at the end of 2024. When the deal closes, FuboTV will receive $220 million plus a $145 million term loan in 2026. There is also a $130 million termination fee that FuboTV would receive if the deal fails to close for reasons such as failing to obtain regulatory approval.
So, if the deal closes, FuboTV will become a more competitive figure in streaming, and at the very least, it will almost double its existing cash reserves if it doesn't. Either way, FuboTV is more financially stable in the short term.
The dust needs to settle
Whether regulators allow the deal to close as structured remains to be seen. Walt Disney would own a 70% stake in the new-look FuboTV group, which some politicians have criticized for being anti-competitive. Disney already owns Disney+ (56.8 million subscribers in the U.S. and Canada), Hulu (49 million), Hulu + Live TV (4.6 million), and ESPN+ (24.9 million).
NYSE: FUBO
Key Data Points
Investors cannot get a true sense of FuboTV's business fundamentals until the deal closes (or doesn't). FuboTV, as a stand-alone business, generated $16.2 million in free cash flow in Q4, but I'm skeptical about the company growing that number without significant subscriber growth. Remember, FuboTV operates on thin margins because most of its revenue goes to licensing. Management is guiding for a 4% decline in subscribers in Q1 2025 due to losing licensing rights to TelevisaUnivision.
Is FuboTV a buy, sell, or hold?
The bottom line is that FuboTV's investment prospects will depend on what happens with the Disney deal.
It's worth remembering that the stock traded at just $1.50 before the deal's announcement in early January. Accordingly, the stock could plummet if regulators block the deal or force the parties to alter it in a way the market dislikes. FuboTV has stuck around due to its focus on live sports, but without Disney's backing, it would remain a small fish in a competitive ocean with deep-pocketed sharks.
Companies like Amazon and Netflix are well aware of how lucrative live sports are, and both have already invested in bringing sports to their respective platforms. I'm not sure FuboTV can genuinely thrive enough to reward long-term investors without Disney's support, and thus, the stock looks like a hold until there's more clarity on the pending merger.
