Still Overvalued, Avoid FuboTV Stock Following Its Collapse

Stocks to sell

The mania surrounding FuboTV (NYSE:FUBO) has long since faded. Trading for as much as $62.29 per share in late 2020, sports streaming and wagering play FUBO stock made a partial rebound during February’s wildness surrounding “meme stocks.”

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But, since that brief trend fizzled out, this stock has basically collapsed. Now changing hands at around $21 per share, some may see it as a buy. Yet, the downward trend may not be over just yet. How so? For starters, even after losing more than two-thirds of its value, FUBO still remains very overvalued.

Sure, as valuations for sports betting plays go, at first glance this stock’s multiple doesn’t appear too frothy. Based on projections of $472.3 million f0r 2021, FuboTV today trades for around 6.16 times sales.

Yet, there’s a reason why investors have bid it down. As I’ve discussed before, this name is getting into sports betting way too late. First movers are set the benefit the most from the expansion of legalized mobile sportsbooks across the states. And as for its streaming segment? It’s a low-margin business with scalability issues — not something investors can look to as a potential cash cow down the road.

In short, even as it has fallen to lower prices, my take on this over-hyped stock remains the same: avoid.

FUBO Stock: Questionable Rebound Potential

FUBO shares trended lower in February and March. But, starting in April, it seems FUBO stock has settled in at prices around $20. You may see this as a sign that the “dust has settled.” Yet, while a partial rebound back to say $30 or $40 is possible, is it probable?

Don’t count on it. The company’s underlying results going forward are going to be what matters for future price action. The problem, though, is that while it seems the company is getting stronger on the surface, there’s no indication that this recent positive news will result in tangible positive financial results.

Take its recent World Cup-related rights deal for example. Put simply, some of the headlines for this news have been misleading. Many likely saw this and thought Fubo won the rights to air the 2022 Qatar World Cup. Not exactly. What it did acquire was the streaming rights to air some qualifying matches for the World Cup.

Now, it’s good the company is locking down more programming for its platform. However, it’s debatable whether news like this is a sign that FuboTV can give incumbent sports broadcasters and streamers a run for their money. Add in longstanding concerns (more below) and it’s easier to see this company disappoint once again.

Still Little to Indicate Its Business Model Will Pay Off

The last time I discussed FUBO stock, I deconstructed the company’s hybrid streaming and wagering business model. The conclusion? With streaming being a low-margin business that doesn’t scale well, I was not confident the company could turn it into a highly profitable segment. And if that’s not bad enough, there’s heavy competition when it comes to acquiring content.

Old-school broadcasters continue to pay heavily for broadcast rights, treating high-profile sporting events as a loss leader. Also, big-tech names have been willing to throw down serious cash for sports streaming rights, too. So, where does that leave this relatively small player?

That leaves FuboTV limited to acquiring more niche sporting events, such as the qualifying matches listed above. Now, we know the “story” here with FUBO stock isn’t just about streaming games. True, there’s the sports betting angle as well. But, even this aspect of the business doesn’t look like a surefire winner.

Again, chalk it up to competition. Established operators have already built up “sticky” customer bases. Meanwhile, this company is just now getting the ball rolling with its sports-wagering operations. With it closing on a strategic bolt-on acquisition, it’s made progress in bringing its sportsbook to market. However, this is still not expected to happen until the fourth quarter. That puts FuboTV even further behind the already-successful competition.

Bottom Line on FUBO Stock

In short, the bull case for FuboTV — the idea that it will disrupt sports streaming and wagering industries — has more holes than Swiss cheese. There’s plenty here to indicate that it will continue falling short of expectations. And, in turn, keep on falling back to lower price levels.

FUBO faces steep competition when it comes to obtaining sports-streaming rights. Plus, it’s lagging behind when it comes to winning over customers. Basically, it’s going to be an uphill battle for this company to scale into a multi-billion dollar platform. A battle for which its odds are increasingly slim.

All in all, the story remains the same for FUBO stock: stay away.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now 

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