I continue to believe that FuboTV (NYSE:FUBO), with anything like its current content and price points, will never appeal to the vast majority of Americans. Meanwhile, I think that the platform’s appeal to sports bettors is greatly overblown. Given these points, I remain convinced that, despite its recent pullback, FUBO stock remains vastly overvalued.
Those who are bullish on Fubo’s shares have made two main points regarding the company’s fundamentals recently: That Fubo is a more convenient way than cable to watch live sports and that the platform’s ability to facilitate betting on live sports will give it widespread appeal.
Here’s why I believe that these points are misguided.
The Vast Majority of Cord Cutters Who Love Sports Won’t Choose Fubo
As I pointed out in my previous column on Fubo, the vast majority of cord cutters are ditching cable primarily in order to save money, and Fubo saves consumers little or no money.
A majority of cord cutters might view the convenience of getting rid of their cable boxes as a secondary benefit of terminating their cable subscriptions. And a small minority of relatively wealthy cord cutters may see enhanced convenience as the biggest benefit of the change.
But for most cord cutters, paying less money for TV content is by far the biggest benefit of the move. Consequently, relatively few of them are going to cut the cord and then sign up for a service like Fubo which costs as much or more money than cable.
Moreover, there are much cheaper ways for cord cutting sports fans to get enough sports to satisfy them. ESPN+ can be acquired in a package with Disney’s (NYSE:DIS) Disney+ and Hulu for $14 per month. MLB.TV costs $110 per year for a single team, or $25 per month and NFL Game Pass costs $99 per year. So cord-cuttng sports fans can watch a lot of games during the year for about $31.50 for month, less than 50% of the cost of Fubo’s cheapest plan ($65 per month).
Plus, with an antenna, in many areas of the nation, viewers can see a great deal of sports on the major, old-fashioned-broadcast networks.
FuboTv Won’t Attract Many Sports Bettors
Those who are bullish on FUBO stock have also pointed to the company’s ability to attract sports bettors. They say that the company can take many live bets during games. For example, down the road, they contend, Fubo’s users will be able to place a bet as to whether their favorite baseball hitters will get on base or whether their top NFL team will score on a specific drive.
But I don’t see anything preventing sports-betting apps, which are usually free to download and use, from taking similar bets. And even if those apps can’t accept certain bets on individual plays, most fans will be happy as long as they can bet on certain aspects of games. In other words, very few people will pay nearly $800 per year so they can bet on football field goal attempts or a single at-bat in baseball.
Finally, I also agree with the contention by the well-known InvestorPlace columnist, Matt McCall, that Fubo will be hurt by its lack of first-mover status in the sports-betting world. He also correctly pointed out that the company will not have an easy time getting the rights to broadcast many major sports games.
Valuation and the Bottom Line on FUBO Stock
Fubo is far from being profitable, but FUBO stock is trading at a trailing price-sales ratio of more than four. Given the company’s likely inability to attract most American TV viewers and the very tough competition in the TV streaming market, that’s a rather steep valuation.
As a result of these factors, I continue to advise investors to sell FUBO stock.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.