In the 16 months that FuboTV (NYSE:FUBO) has been trading publicly, FUBO stock has posted a small gain. If you look at that without any context, you’d say the stock was a good-but-not-great performer.
However, if the last two years have taught investors anything, it’s that context matters a whole lot. FUBO stock went public at a time when retail investors were flocking to low-priced stocks with compelling stories. Flush with stimulus cash and facilitated by trading apps like Robinhood (NASDAQ:HOOD), these investors created the perfect conditions for FUBO stock to become one of the premier meme stocks of early 2021.
This stock soared as high as $54.24 last year. But as the saying goes, that was then. For the last 12 months, FUBO stock is down 80% as well as 33% year-to-date (YTD). There are a couple of reasons why.
First, investors continue to move into risk-off stocks. As a company that’s still not profitable, FuboTV does not meet that definition. Secondly, streaming stocks overall are getting whacked after Netflix (NASDAQ:NFLX) delivered its quarterly earnings report. The streaming giant’s subscriber growth outlook fell dramatically short of expectations. NFLX stock dropped 21% on the news.
All that said, I believe the year-long selloff in FuboTV is a chance for investors to reevaluate their investment thesis. And if you decide that FUBO stock is right for you, you can get it at an attractive price point.
FUBO Stock: Was It Ever Supposed to Be Here?
One of the clichés in sports is the team that wasn’t supposed to be there. This usually describes a team that has outperformed expectations. FuboTV did just that. In the first quarter of 2021, the company posted dramatic growth. That was part of the rocket fuel that took FUBO stock to lofty heights.
But the cautionary tale for the broader market — and particularly a stock like FUBO — is that price doesn’t necessarily equal value. In this case, just because the stock was trading at over $50 per share four months after its IPO didn’t mean it was worth 5 times more than its initial public offering (IPO) price of $10.
That’s because in its Q3 earnings report, FuboTV posted revenue of $156.7 million. That was a 156% increase year-over-year (YOY). However, that was down from the 196% YOY growth the company posted in the prior quarter.
On top of this, did I mention that the company is not yet profitable? And that it likely won’t be for another four to five years? That means there’s an awful lot of gambling going on with FUBO stock.
Still, I use the word gambling for another reason. Why? Because if FUBO is to reclaim its lofty heights, sports betting will be one of the key catalysts.
Capturing a Captive Audience
FuboTV’s distinct brand positioning is as a streaming service consumers can go to for live sports. But the problem is this position isn’t necessarily unique enough to attract consumers who want more. FuboTV doesn’t deliver original content like Netflix or NBCUniversal’s Peacock. What’s more, at a time when consumers are moving from cutting the cord to slowing the stream, it’s reasonable to question whether subscriber growth is already peaking.
However, FuboTV also plans to integrate a sportsbook model into its platform. At first, the service will simply suggest and update relevant bets in real-time based on the game being viewed. But as the company works to use its partnerships with professional sports franchises, it could turn into an online sports betting platform in its own right.
While I can’t disagree that the company is going after two growing sectors of the economy, the challenge is that these are also two of the more competitive sectors. What FuboTV is really banking on, though, is that it will be able to get this business from consumers already on the platform.
Should You Buy FUBO Stock?
As you might expect, analysts haven’t been kind to FUBO stock since its last report. One particularly harmful rating was issued by analyst Laura Martin on Jan. 21. Martin maintained a “buy” rating but lowered the price target from $60 to $15 per share.
Still, that would be a gain of 50% from the current price. What’s more, the average price target on MarketWatch gives FUBO stock a 230% upside.
FuboTV has benefited from the meme trade as well as a pandemic-fueled bump in streaming stocks. But now at a price tag near its IPO price — and with increasing revenue — I believe FUBO stock is a cautious buy. Still, if you don’t already have a position in the stock, I’d wait until after the company reports earnings next.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.