A Wall Street firm on Thursday issued a brutal takedown of highflying streaming video service FuboTV (FUBO). FUBO stock tumbled on the negative report.
LightShed Partners initiated coverage of FUBO stock with a sell rating and a price target of 8.
FuboTV “may be the most compelling short we have ever identified in our career as analysts,” LightShed Partners analysts Richard Greenfield, Brandon Ross and Mark Kelley said in a blog post.
“Over the past few months, we have seen numerous examples of companies with valuations that defy logic,” they said. “We understand the broader market dynamics at play with ‘cheap money’ and an exuberant retail investor. However, the run-up in FUBO shares is just plain egregious, in our view.”
In morning trading on the stock market today, FUBO stock fell 14.6%, near 44.90. On Tuesday, it notched a record high of 62.29.
FUBO Stock Originally Priced At $10
New York-based FuboTV held its initial public offering on Oct. 8 with FUBO stock priced at $10.
FuboTV is a sports-first live TV streaming platform. It ended the third quarter with 455,000 paying subscribers, up 58% year over year. However, FuboTV is not profitable. In the September quarter, it lost an adjusted $1.65 a share on sales of $61.2 million. Still, FUBO stock jumped after its third-quarter earnings report.
As a virtual multichannel video programming distributor, FuboTV is exposed to the declining linear pay-TV business, LightShed said. Growth in the sector is in video-on-demand services, either subscription or advertising-based, they said.
FuboTV has an emphasis on sports programming, but its bundle is missing many sports channels, LightShed said.
Profits Elusive, Sports Betting ‘A Fantasy’
Also, FuboTV will have a difficult time reaching profitability, the analysts said.
“Assuming no revenue outside of subscription fees, we believe FUBO will be at best a zero gross margin business in maturity,” they said.
Meanwhile, FuboTV’s ambitions in sports betting are “a fantasy,” LightShed said.
“FUBO has yet to explain how they plan to make money from sports betting beyond they have a substantial number of sports fans that subscribe to their (multichannel video) service,” LightShed said. “They acquired a failed free-to-play startup called Balto (which had no product or revenue or even a website). Investors began to view FUBO as the next FanDuel and DraftKings (DKNG) for no reason other than management has been talking up the long-term potential of sports betting without specifics.”
FUBO stock has a best-possible IBD Relative Strength Rating of 99. But the IBD Stock Checkup tool shows lots of red flags for FUBO stock. They include its miserable EPS Rating of 2 out of 99. It also has a SMR Rating of D, on an A-to-E rating scale.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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