If you like contrarian, “moonshot” type plays, I can see why you might be interested in FuboTV (NYSE:FUBO) stock. With FUBO stock down more than 79% over the past year, it may appear that investors have overreacted to recent developments with this sports streaming/wagering play.
However, its move to the market graveyard is more than justified. For one, the company is walking back past guidance. It now anticipates a greater slowdown in revenue growth this year. Along with this, there’s its profitability challenges.
The market has also soured on not-yet-profitable growth plays. It would be one thing if FuboTV was on the verge of swinging from quarterly losses to quarterly earnings, yet that’s not the case.
Instead, it’s expected to report losses this year and the next. With this in mind, it’s hard to be confident that the situation will improve rather than worsen from here.
| FUBO | FuboTV | $3.24 |
Slowing Growth, Big Losses Are Big Problems for FUBO Stock
With the various market sell-offs that have happened throughout this year, many names have fallen to compelling price levels. Again, that’s not the situation we’re seeing here with FuboTV.
Sure, a lot of the decline in FUBO stock is due to changing market conditions. Growth stocks, especially unprofitable growth stocks, have fallen out of favor. At the same time, this doesn’t fully explain why it trades at a small fraction of what it traded for just twelve months ago. A larger factor here is the two issues this company is facing: slowing revenue growth, and profitability challenges.
As seen in its most recent results, revenue for first quarter (ending March 31) came in at $242 million. Although up 102% year-over-year, on a sequential (quarter-to-quarter) basis, said growth was underwhelming. During Q4 2021 (ending Dec 31), Fubo reported $231 million in revenue, meaning sequential revenue growth was just 4.76%.
If that’s not underwhelming enough, losses also widened in Q1 2022 versus Q4 2021. Reporting a net loss of $112 million in Q4 2021, for Q1 2022 FuboTV reported a $140.8 million loss. More money’s coming in, but more money is flying out.
Guidance Signals Possibly More Trouble Ahead
With the FUBO stock earnings report, the results themselves weren’t the only source of disappointment. Management’s updates to guidance also left much to be desired. For the current quarter, the company expects to generate between $220 million and $225 million in revenue (a sequential drop in its top line).
For the full year 2022, FuboTV is guiding for between $1.02 billion and $1.03 billion in revenue. Before, it was guiding for between $1.08 billion and $1.09 billion. Based on its reported 2021 revenue, this means estimated growth of between 59.8% and 61.3%. Nothing to sneeze at for sure, but sharp deceleration compared to the rate of growth between 2020 and 2021 (144%).
That’s not all. Management’s current forecast may be overestimating how robust demand for its service will be in the quarters ahead. If there’s an economic slowdown or recession, there could be much worse growth deceleration.
Already set to report negative earnings this year, next year, and the year after that, an even sharp slowdown in growth could mean progress made in getting it out of the red. Put it all together, and it’s hard seeing this situation getting better in the near-future.
The Bottom Line on FUBO Stock
In closing, I’ll touch on something else that you shouldn’t view as a panacea for FuboTV: its move into sports betting. Back when this stock was a high-flier, its plan to be a hybrid sports streaming/wagering service was viewed as a winning combination that would give it an edge in both arenas.
However, investors have realized there was more hype than substance behind this view. With rival sports betting apps already grabbing most of the market share, it’s doubtful this will be enough of a “carrot” to entice sports fans to subscribe to Fubo’s platform.
This stock currently earns an “F” rating in my Portfolio Grader. Admittedly, after its severe stock price declines, further declines may be modest. Still, with the odds favoring more disappointment rather than an upset, steering clear of FUBO stock is the best play you can make.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.