New Pay TV And Sports Offerings Will Expand Competitive Reach

Key Takeaways

• Strategic partnerships, diverse content offerings, and cost-effective sports programming aim to boost subscriber growth, engagement, and competitive positioning in the pay TV market.
  
• Financial discipline and cost management lead to cash flow improvements, projecting a solid trajectory toward profitability within the next few years.
  
• Declining subscriber numbers and ad revenue, along with rising competition, threaten Fubo's growth and financial sustainability, particularly impacting revenue streams and net margins.

Catalysts

Operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally.

• The definitive agreement with The Walt Disney Company to combine Hulu + Live TV and Fubo is set to make Fubo the sixth largest player in the pay TV space. This expanded scale is expected to foster a more competitive environment, allowing for more competitive offerings and price points, which could drive revenue growth.
  
• The launch of a new sports and broadcasting service with a robust lineup of pro and college sports is planned for the fall sports season. This new offering aims to attract new subscribers, potentially boosting revenue and user engagement.
  
• The introduction of multicultural programming, like the Zee family bundle, taps into an underserved market segment. This strategy diversifies Fubo's content offerings, potentially expanding its subscriber base and positively impacting revenue growth.
  
• The reduction in pricing for the Latino plan by 55% and efforts to replace Univision programming with cost-effective high-quality sports content indicate a focus on maintaining affordability for consumers. These actions could improve subscriber retention and enhance margins by avoiding unsustainable cost increases.
  
• The achievement of positive free cash flow for the first time and ongoing improvements in Adjusted EBITDA and net loss highlight Fubo's commitment to financial discipline and cost management. These operational efficiencies are expected to improve earnings and margins, supporting the company's goal of reaching profitability by 2025.

fuboTV Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming fuboTV's revenue will grow by 10.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -10.7% today to 1.1% in 3 years time.
• Analysts expect earnings to reach $24.1 million (and earnings per share of $0.06) by about April 2028, up from $-173.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $29.6 million in earnings, and the most bearish expecting $18.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 106.0x on those 2028 earnings, up from -5.9x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 16.7x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.34%, as per the Simply Wall St company report.

fuboTV Future Earnings Per Share Growth

Risks

• The advertising revenue for Fubo declined by 11.8% year-over-year due to a decline in ad insertable content, which could negatively impact overall revenue growth.
  
• The company experienced a subscriber decline in the Rest of World segment and anticipates a 16% year-over-year decline in subscribers in that area, potentially affecting total revenue and subscriber growth metrics.
  
• The nonrenewal with Univision is expected to impact subscriber numbers negatively, leading to a projected 4% decline in North America subscribers for the first quarter of 2025, which could adversely affect revenue streams.
  
• The increasing competition in the ad-supported streaming space, alongside the pricing and distribution strategy adjustments, could further pressure revenue growth if Fubo cannot attract new subscribers effectively or monetize existing subscribers efficiently.
  
• The expected wider funnel due to newly introduced content bundles might face challenges with subscriber acquisition costs relative to monetization, which could negatively impact net margins and the company's financial sustainability.

Valuation

• The analysts have a consensus price target of $4.812 for fuboTV based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.4, and the most bearish reporting a price target of just $3.35.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.2 billion, earnings will come to $24.1 million, and it would be trading on a PE ratio of 106.0x, assuming you use a discount rate of 8.3%.
• Given the current share price of $3.0, the analyst price target of $4.81 is 37.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.