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fuboTV: Why Preliminary Results Should Make You Skeptical

fuboTV Inc. (NYSE:FUBO), a TV streaming platform for live sports events, news, and entertainment will announce its fourth-quarter (Q4) 2021 and full-year 2021 financial results on Feb. 23. Embrace for a high level of volatility in FUBO stock …

fuboTV Inc. (NYSE:FUBO), a TV streaming platform for live sports events, news, and entertainment will announce its fourth-quarter (Q4) 2021 and full-year 2021 financial results on Feb. 23. Embrace for a high level of volatility in FUBO stock on that day. Additionally, assuming there is an earnings per share (EPS) beat or miss, a new trend may form for the stock price.

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Over the past year, FUBO stock has lost 80.4% of its value. Additionally, it is down 47.9% year-to-date (YTD). A very strong quarter and upbeat guidance for 2022 are urgently needed if a bottom is to be reached. I do not like bottom-fishing in investing as the risk of a stock getting cheaper is, in most cases, asymmetrical to the odds of making a solid and sustainable rebound. It feels like an example of a dead cat bounce.

Interestingly, fuboTV has already released preliminary results for Q4 2021, removing much of the anxiety for key financial metrics as we have a general idea of their range.

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FUBO Stock at a Glance

The live TV streaming platform has the latest information on its website. It states that in Q3 2021, it had 944,605 paid subscribers, $156.7 million in revenue and 284 million total hours of content streamed. These numbers as isolated figures do not tell much. Their trend analysis is what matters.

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If I had to isolate one key phrase from the preliminary results, it would be: “Both revenue and subscriber metrics are expected to exceed previously issued guidance resulting in a record quarter and year for fuboTV.”

A novice investor may get excited and buy the stock ahead of the official Q4 2021 earnings. I would not do that. It is like gambling without knowing if your odds of winning are good, mediocre, or terrible. Yes, even gambling has probabilities of success, although the outcome is based on emotion rather than logic.

What do we expect from the earnings report on Feb. 23? Q4 2021 total revenue is expected to be in the range of $215 – $220 million, an increase of 105% – 109% year-over-year. This is too positive. Full-year 2021 total revenue is expected to be in the range of $622 – $627 million, an increase of 138% – 140% year-over-year.

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Fourth-quarter 2021 advertising revenue is expected to be over $25 million, representing an increase of more than 90% year-over-year.

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Paid subscribers at year-end are expected to exceed 1,100,000, showing an increase of more than 100% year-over-year. If this materializes, it will shed tons of ink about the growth of fuboTV on many financial sites.

Other metrics to monitor will be Subscriber Acquisition Cost (SAC), subscriber churn, and how much cash the company will have on its balance sheet. Cash is king for any type of business.

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Important Key Metrics

We already have four positive notes about the upcoming actual financial results. What can go wrong? In one word: everything.

As you may have noticed, fuboTV has not made any mention of profitability, free cash flow, or operating margins. These are the weak areas for the firm, which has been unprofitable since 2018.

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Investors should know that shareholders of fuboTV have been diluted in the past year, with total shares outstanding growing by 41.4%. There is a potential for Q4 earnings to show a widening loss as a result of scaling the business.

Take, for example, the fiscal year 2020. The firm reported a net loss of $570.33 million and a free cash flow of negative $148.52 million. Burning more cash than the $134.94 million reported on its balance sheet is not something to be proud of. And it certainly does not add value to the shareholders.

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Will the platform report a positive operating income? If it does not, a core weakness in its business model will continue. In 2022, there has been a major shift in investment moods as high-growth stocks that do not show an improvement in profitability and in valuation are punished by investors.

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Revenue growth is the start of everything in financial analysis. Just think of pre-revenue companies and their bizarre valuations.

If fuboTV does not show a substantial improvement in profitability and free cash flow, do not be surprised to see revenue growth that cannot support the stock price at the current price near $8. After analyzing the last quarters and fiscal years, I do not like the stock.

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Other companies are profitable, generate positive free cash flow, and even have attractive dividends, considerable revenue, and EPS growth. If you want to speculate on fuboTV’s earnings, try a straddle or a strangle. With limited capital, a huge move either up or down could work. However, nothing is guaranteed.

Investing now in fuboTV ahead of its earnings report is not a safe idea. Wait for the turn to happen in profitability before jumping in the stock.

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On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn. 

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