Over the past two months, sentiment for FuboTV (NYSE:FUBO) stock has gone from “game over” to “game on.”
Hitting a new low of $2.32 per share in late July, FUBO stock briefly spiked to above $6 per share in August as the result of an extremely positive response its first investor day presentation.
Although this surge didn’t last long, shares remain well above their 52-week low. More recent positive news about the potential for expansion is helping the stock find support between $4 and $5 per share.
This may seem like a sign that FuboTV will continue to make a comeback. Unfortunately, a closer look suggests the opposite. Even as management’s latest outlook lays out a path out of the red, a major issue with FuboTV continues to persist. The market may think otherwise, but to me this stock still looks like an underdog to avoid, no matter the odds.
Why FUBO Stock is Holding Steady
Last month, FuboTV’s management presented to the investing public its game plan to hit positive cash flow by 2025. To achieve this, FuboTV is targeting 20% annualized subscriber growth, increased monetization through advertising and sports wagering, and a reduction in its operating costs as a percentage of revenue.
As mentioned above, this presentation was more than enough to get traders excited again for FUBO stock. This excitement has calmed down some, but much of it has been sustained by further positive news: the launch of Fubo’s sportsbook application in New Jersey. Traders are likely to perceive this as a game-changer. The Garden State is one of America’s largest sports betting markets.
With investors warming back up to FuboTV, and not cooling on the stock so far, it may seem as if its partial rebound could morph into a continued recovery. However, I wouldn’t make this assumption. While management is talking a good game, it remains to be seen whether it can successfully put its plan into action.
In the meantime, the current situation with FuboTV will come back into focus. This will likely re-apply pressure to the stock, which makes buying it now a risky wager to say the least.
How FuboTV Could Again Drop the Ball
It’s hardly a given that the above-mentioned growth plan will pan out for the company. High competition in both the sports streaming and sports betting spaces could limit its ability to grow its subscriber base.
The digital ad market, weakening due to the current economic slowdown, could take time to recover. In short, FuboTV’s management may be overly optimistic in its forecast. Having said all this, it’s not really worth discussing whether FuboTV will live up to its long-term goals, or fall far short of them.
Even before it becomes clear whether the company will deliver or disappoint on its growth strategy, FUBO stock could plunge again, due to its key current issue. As I discussed earlier this month, it’s going to take time for FuboTV to solve its cash burn problem.
That’s a big problem. The company is currently reporting negative cash flow of $91.3 million per quarter. To keep the lights on, it’s going to need to raise more money within a few quarters. Most likely, FuboTV will need to raise this capital through an equity raise. In turn, this will dilute existing shareholders, causing the stock to move lower.
Bottom Line on FUBO Stock
Hope and hype haven’t fully faded just yet for FuboTV stock, but I wouldn’t bank on this continuing. After the investor day presentation and the announced launch of its sportsbook in New Jersey, there isn’t likely going to be much of the exciting news needed to goose the meme crowd once again.
Instead, the next spate of headlines about FuboTV may be of the negative variety. Its next earnings report (set for release on Nov. 4) is likely to reveal that cash burn remains a major issue and that a dilutive equity raise is extremely likely.
Pretty soon, the present negatives with FUBO stock will again outweigh its potential future positives. As this could cause shares to tank again (and possibly re-test their 52-week low), steering clear of it is your best move.
FUBO stock earns a D rating in my Portfolio Grader.
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.