It’s not hard to see why streaming television stocks are called that fuboTV(NYSE: FUBO) have been turned upside down since the peak at the end of 2020. The COVID-19 pandemic essentially confined millions of people to their homes, giving them time and reason to seek out cost-effective entertainment. Investors reacted and realized only after this company still faces enormous challenges… including the cord-cutting headwinds blowing against more traditional cable players like Comcast‘s Xfinity and Charter‘s spectrum.
However, there are a handful of overlooked nuances that make this ticker a speculative buy in the shadow of a major, multi-year pullback.
Do you miss the morning spoon?Breakfast news delivers it all in one fast, silly and free daily newsletter. Register for free »
Don’t misread the message. fuboTV doesn’t fit well into everyone’s portfolio at the moment. The stock is down about 97% from its all-time high reached not long after its IPO in October 2020. It’s probably not even safe enough for most people’s wallets. However, if you are a speculator who can tolerate the risk, there is a bullish argument.
But first things first. If 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 services, plus a respectable on-demand library. However, it is decidedly sports-oriented, offering a robust range of sports programming such as NFL Network, professional team-specific channels, and a wide range of football matches that are otherwise not easily accessible to American fans.
It’s also cheaper than cable, if only because you avoid the local fees and taxes normally found on monthly bills for more conventional cable services.
It doesn’t seem to matter much lately. While fuboTV’s legal argument was probably at least part of the reason Walt Disney, FoxAnd Warner Bros. Discovery were blocked in August from co-launching a sports-focused streaming service, competitors keep coming. In any case, more and more sporting events are appearing on streaming platforms Netflix‘s live broadcast of the fight between Mike Tyson and Jake Paul. And Disney plans to launch a standalone streaming version of ESPN sometime in the second half of next year, continuing to eliminate the main reason consumers continue to pay sky-high cable bills.
The point is that fuboTV’s service seems attractive enough and affordable enough to continue to draw an audience. The company’s third-quarter customer count reached a record of just under 2 million for the three-month period ending in September, while exceeding forecasts of a record 2.03 million headcount for the current quarter. Most of the customers and most of the growth comes from the full-price cable alternative, as opposed to the smaller, (much) cheaper services in the rest of the world.
Data source: Fubo Inc. Chart by author. Numbers run into 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 is also still adding to their paying customer base. Consumers find this option an acceptable alternative to conventional cable.
But that’s only part of the reason to take a speculative chance on fuboTV stock while it’s still so low.
You should always be wary when investing in a stock simply because it is a potential takeover target. Many – if not most – of these assumptions do not pan out as expected.
On the other hand, smart investors always pay attention. That is, you have to notice what’s happening within an industry, find out about it Why it happens, and then determine how that underlying trend applies to a particular company.
And right now, companies within the entertainment industry are beefing up their businesses with divestitures (like what Comcast is considering with certain cable channels), partnerships (like those Disney, Fox and Warner have recently attempted), and acquisitions.
Case(s) in question: Walmart recently completed the acquisition of TV manufacturer Vizio, expanding its role as a media intermediary. And although it was ultimately canceled before completion, AT&T‘s DirectTV and Echo starRival satellite cable name Dish Network was recently slated to merge. Let’s also not forget that Needham proposed a streaming technology outfit earlier this month Roku is a buyout candidate of a company chasing an established brand name in the connected TV space with a base of 85.5 million regular users of its platform.
In other words, as organic growth dries up, media outfits are exploring other options. Deal making may be the best choice for many of them.
FUBO Earnings (Quarterly) data by YCharts
That’s no guarantee — or even a confident prediction — that the unprofitable fuboTV will inspire a suitor to make a formal bid anytime soon. However, there is some water in the argument. The entirety of the company’s business, its brand name and its 2 million customers can currently be purchased for less than $600 million. The company’s total liabilities are just over that amount, which is virtually no long-term debt. By the standards of entertainment stocks (or any stocks for that matter), that’s a bargain, if the buyer knows they can do something constructive with the target.
And yes, eliminating a legitimate competitor in the streaming television space is arguably a constructive choice, even if such a deal is struck at a much higher price than the current price of fuboTV stock.
Again, a future acquisition alone is a bad reason to own a company; the rumors don’t seem to materialize as often as investors would like. You own part of a company primarily because it has an attractive future. You buy the shares when this bright future is not fully reflected in the price.
However, the prospect of a company becoming the beneficiary of an industry-wide takeover wave or rush of partnerships certainly reinforces an existing bullish argument.
fuboTV is currently tentatively meeting that proposition, especially given that it’s on track to turn a profit sometime in 2027, and that the analyst community’s current consensus target of $2.38 is 40% above the current share price. If you can stomach the risk, that wouldn’t be a bad place to open a new position in this admittedly speculative ticker.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:If you had invested $1,000 when we doubled in 2009,you would have $369,349!*
Apple: If you had invested $1,000 when we doubled in 2008, you would have $45,990!*
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $504,097!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. James Brumley has positions at AT&T and Alphabet. The Motley Fool holds positions in and recommends Alphabet, Netflix, Roku, Walmart, Walt Disney and fuboTV. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
1 Growth Stock Down 97% to Buy Right Now was originally published by The Motley Fool
