What a time it’s been for fuboTV. In the past six months alone, the company’s stock price has increased by a massive 80.3%, reaching $2.74 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy fuboTV, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is fuboTV Not Exciting?
Despite the momentum, we're swiping left on fuboTV for now. Here are three reasons why there are better opportunities than FUBO and a stock we'd rather own.
1. Weak Growth in Domestic Subscribers Points to Soft Demand
Revenue growth can be broken down into changes in price and volume (for companies like fuboTV, our preferred volume metric is domestic subscribers). While both are important, the latter is the most critical to analyze because prices have a ceiling.
fuboTV’s domestic subscribers came in at 1.47 million in the latest quarter, and over the last two years, averaged 13.4% year-on-year growth. This performance was underwhelming and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. Operating Losses Sound the Alarms
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
fuboTV’s operating margin has risen over the last 12 months, but it still averaged negative 13.9% over the last two years. This is due to its large expense base and inefficient cost structure.
3. Cash Flow Margin Set to Decline
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Over the next year, analysts predict fuboTV’s cash conversion will fall to break even. Their consensus estimates imply its free cash flow margin of 8.6% for the last 12 months will decrease by 10.8 percentage points.
Final Judgment
fuboTV isn’t a terrible business, but it isn’t one of our picks. Following the recent rally, the stock trades at 106.3× forward EV-to-EBITDA (or $2.74 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
Stocks We Would Buy Instead of fuboTV
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