October 7, 2022


Skillful Business Crafters

Why fuboTV Stock Crashed After Q3 Earnings

fuboTV (NYSE:FUBO) specializes in streaming media. Specifically, the platform connects viewers with over 100 live TV channels across sports, news, and entertainment. The company recently expanded into the mobile sports betting market with the launch of the Fubo Sportsbook in Iowa. Even so, the stock is down 60{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} from its all-time high, due in part to a sharp sell-off following the company’s third-quarter earnings report.

In this Backstage Pass video, which was recorded on Nov. 10, Motley Fool contributor Toby Bordelon discusses fuboTV’s recent financial performance, and he offers an explanation for the sharp sell-off. Motley Fool contributor Brian Withers also appears in this clip.

Toby Bordelon: This is an over-the-top streaming service, is what they mainly do. Starting to get into some gambling, some wagering revenue. But that’s early stages there. Sports-focused, over-the-top streaming service, but with a big focus on live sports.

The quarter was really good, right? We’ll look at the business, then we’ll talk about the reaction. The business: The quarter was really good. Revenue, $156 million, up 156{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} year over year. They beat on that. They beat on earnings per share. That’s a loss. They lost $0.47 per share. But compared to last year’s loss of $6.20, we’re right on track. That’s where we want to be. They raise their outlook a little bit. It should be $617 million, the last one, so between $612 million and $617 million revenue for the year. That would represent, at the midpoint there, about 135{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} year-over-year growth in revenue, for the full year. That’s looking pretty good.

One million subscribers, Brian. They’ve passed the 1 million subscriber mark as recently. As the quarter end, it was 944,000 or so. Even since the end of the quarter to right now and we announced this, you can see how that growth is continuing. That’s 108{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} year-over-year for the quarter; 39{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} sequential growth in subscribers from the immediately previous quarter. Record-high viewership, 284 million streaming hours. That’s up 113{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b}. Revenue per user, 10{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b}. You see that there. They acquired another company, Molotov SAS. They claim to be the leading TV streaming platform in France with about four million monthly active users. That’s a big plus for international push, expand international markets as acquisitions are going to really help them do that. They also launched Fubo Sportsbook in Iowa just recently, last week. They’re starting those early stages of their sportsbook or sports gambling business.

The stock, when I checked last, was down about 24{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} today, they reported last night after the bell. So, you look at these numbers, you look at how they’ve been doing, Brian, and say to yourself, that’s really good. The metrics look good, the business looks good. Why is the stock down 20{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b}? That doesn’t make any sense.

This is something we need to think about. We need to think about this from an investment standpoint. Just remind ourselves that occasionally — and it might not seem like it right now, or in the very recent past — occasionally, valuation does matter. I guess what’s going on here, Fubo stock is up a lot in the past year or so. You see that stocks aren’t there where they spiked it but come down. But if you look sequentially recently in their IPO, they’re quite a little bit, I think, of a case expectations getting a little bit ahead of reality. Even with a good quarter, people are now looking at us like, “Oh, this is over-the-top TV streaming business with maybe a sportsbook kicker at some point.” But they’re a TV company, functionally, an online cable company. Is this really the appropriate price to pay right now for the growth we’re seeing? You see a rethinking of that. That’s what I think is going on here. You got to remember that, right. Valuation does play into this. It’s something you’ve got to keep track of. It is not the case that no price is ever too high to pay for any given business.

I think Fubo’s probably going to be fine. I think they’re going to grow into their growth. I think down 20{614c55998ee2f2593d42882a86444f5648ce8ae9e914fe55020881091372b47b} for company like this is not terrible for me. Just have to accept that. It’s this is not a case of the valuation where you’re being totally unconnected to all reality, which you could see that for a few companies, but just remember, investors, that it is a factor, valuation does matter. From time to time, especially with high-growth companies, you’re going to see quarters like this, even if objectively, the business performance looks really good. I will just end my valuation rant right there, Brian.

Brian Withers: Like we saw from Fiverr and Jon, both of these are high-growth companies and they’ve zoomed to pass their business performance and the excitement got ahead of the actual business and then comes down to earth. Over the long term, I think things are going to smooth out and it’s going to follow the business performance, but that’s a little hard to take for investors. Good advice, or a good reason to have a diversified portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.