In the world of over-the-top (OTT) streaming services, fuboTV (NYSE: FUBO) stands alone. Not only does it feature live streaming of all major league and international sports games, but also offers cable channels like MTV and IFC and premium channels like STARZ and Showtime, all in 4K. In Q4 this year, the company will be launching its betting service wherein users can bet on sporting events directly from the fuboTV app.
There are existing services like this already, such as DISH network’s partnership with DraftKings, but nothing that is so seamlessly integrated to create an easy-to-use gambling synergy. With a growing subscriber base and the high margins associated with online sports gambling, fuboTV is the one streaming service stock I’m buying right now.
A look at fuboTV’s financials
fuboTV had a fantastic second quarter as evidenced by its earnings report. Revenues from subscriptions and advertisements were both up nearly 190% and over 280%, respectively, year-over-year (YoY). Additionally, its cash and equivalents grew by over 200% in the same period. Subscriptions and engagement grew as well, with the former surging 138% and the latter, 148%, YoY.
The company offered guidance for the year which will amount to a 100% YoY increase, and that’s not including any potential revenue from wagering. And finally, as a sign that the company is moving in the right direction and ultimately towards profitability, fuboTV’s earnings, or in this case, losses per share, have shrunk by over 67% YoY.
What I like about fuboTV
Online sports wagering in the U.S. is projected to reach $155 billion in value by 2024 and fuboTV will be entering that market by the end of this year. Online sports betting is only legal in 12 states so this will allow fuboTV to have a first-mover advantage once legislation passes for legalization in the rest of the states. As a sports streamer with very little competition, the company not only provides the perfect ecosystem for wagering but is also very attractive to both sports enthusiasts and gamblers; this will no doubt allow it to grow its subscriber base and boost its current market share of 5%.
Speaking of subscribers, there are still nearly 80 million households with traditional cable just waiting to cut the cord and pay less money and avoid restrictive contracts. This is a very deep pool into which fuboTV can cast a net. Prior to launching its sportsbook, the company is deploying various betting contests which will reward users with a free annual subscription. fuboTV plans to expand these competitions to the advertising realm to offer prizes like a free car or pizza, opening up an additional revenue stream. The company will also collect user data to customize a wagering experience specific to each subscriber (like alerts for betting at the third quarter of a football game or the third period of a hockey game). This will provide the company a very powerful competitive moat in the industry.
Risks to fuboTV’s share price
The world of gambling is highly restrictive with every state having its own set of regulations. To date, fuboTV has only received regulatory approval in one state, Iowa, with consent still pending in four additional states. The company surveyed its users and the number that said they would be willing to place a wager on the platform was an unimpressive 22%.
Another concern is the cost of content. With sports programming constantly going up in price, the company will have a tough time reaching profitability any time soon, unless the gambling side of the business takes off and that’s a muddy road to trod considering all the current restrictions and regulations in that world.
fuboTV’s growth potential
The company’s potential is what makes it such a high reward long-term investment. You can never go wrong betting on vice stocks like Altria or Brown-Forman. Sports betting revenue in 2020 was a little over $1.5 billion. That number is expected to balloon a hundredfold as more states adopt legalization, and fuboTV’s revenue is sure to grow as a result.
Streaming stocks are great investments, but there are plenty of other great opportunities in MyWallSt’s shortlist of market-beating stocks. Access them by starting your free trial today.
Contributing Writer at MyWallSt
David fell in love with the stock market in 2000 after making $30,000 overnight on Techniclone. His favorite stocks today are Netflix, Google, Amazon, and Apple as they are the market leaders in their sectors and are safe long-term investments.