Notice: I love this new TV streaming service, and I am starting to rack up its stock
In search of what I have called breakthrough ideas at reasonable valuations, I have a new business for us: fuboTV FUBO,
Fubo is a streaming TV service with a partial focus on sports programming and, soon, betting.
When I started researching fuboTV a few weeks ago, I had no idea that it was a direct competitor to my YouTube TV service (not to be confused with YouTube itself), that i use for cable tv since last year.
But of course, that’s what I found when I signed up for the service. And frankly, it has a much better interface and layout than YouTube TV. (GOOG alphabet,
owns YouTube TV.) So my wife wants us to switch to fuboTV for good, which we will probably do at the end of the fuboTV free trial month.
While streaming companies mainly focus on delivering recorded content (think Netflix NFLX,
Walt Disney’s DIS,
Disney +, HBO Go, Hulu, YouTube and others), fuboTV has focused on sports content. This focus on mostly live content is somewhat unique to the sport and frankly puts fuboTV in a position where it could become an acquisition target for one of the big streaming companies.
As for valuation, it is surprisingly cheap compared to other growth stocks in the industry. The company is on track to increase revenue by more than 150% this year to $ 570 million, and analysts expect another 60% growth next year to more than $ 900 million. The market cap is $ 3.8 billion, which means the stock is trading at “only” seven times this year’s earnings and just over four times next year’s earnings estimates.
Another compelling thing is that the company has not over-promised its milestones as it becomes profitable in the years to come. The company expects to have at least three million subscribers in 2026, up from 680,000 subscribers at the end of last quarter. With 10 million homes in the United States currently using a streaming service for live TV, that means fuboTV’s market share is around 6% or 7% and is growing by around 0% three years ago. years.
In the United States, about 80 million people or businesses subscribe to some kind of cable TV service, which means that 70 million homes can still cut the cord off traditional cable and satellite TV service. to a streaming service.
Over the next five to ten years, there will be tens of millions of people signing up for streaming TV, so let’s say 50 million subscribers will come to any of the streaming TV services. Assuming a 10% market share, that would represent five million subscribers at an average of, say, $ 60 per month for almost $ 3 billion in revenue per year.
The company is currently operating at a gross margin of around zero as it acquires the rights to more sports content and competes for cable services with larger competitors. I would expect gross margins for the entire company to be 40-50% in five years. FuboTV adds a higher margin gaming / sports side to the business as states roll out new, looser regulations.
I started buying common stocks in fuboTV for what I think is a mid-sized position over the next two or three weeks.
I often wonder if we’re not stupid to bother talking about larger markets.
Having said that, the markets are a collection of individual stocks, and I think it’s useful to make sure that we aren’t too “long” when the risk-reward ratio of most individual stocks is based on valuations, growth rates, sentiment and the economy. are high, as they are now.
In that vein, one thing I think I finally understood about markets and how they react to news of individual stocks and, therefore, larger markets, is that there is usually a delayed reaction. . When my youngest daughter, who has Down’s syndrome, was younger, she often had a late reaction to stimuli. For example, when we sneaked up to her and said “Boo! It usually took her half a second before she laughed.
For most people, this reaction would be instantaneous. In recent times, the markets, as millions of retail investors first entered the markets and are now trading around the news, have had a late reaction to many events. Companies can report great results and their stocks will go down at first before finally reacting to the good news a few days later.
Last Friday (September 10), markets saw a big reversal from their highs and ended in an ugly close. On this Wednesday, old-school pros like Jim Cramer were looking to sell morning pop into the open in the hope that, as was often the case for most of my career, the markets would reverse and would sell out later today.
But retail and momentum investors just bought the downside, as they’ve been doing all year. The markets have closed regularly.
Keep in mind this late reaction from the markets.
Cody Willard is a columnist for MarketWatch and editor of Revolution Investing newsletter. Willard or its investment firm may own or consider owning securities mentioned in this column.