FuboTV stock is down 97% from its high, but still not a buy

FuboTV (NYSE:FUBO) has established itself as a leading live sports streaming service. The company has nearly 1.5 million subscribers in North America, each paying an average of $85.69 per month, and another 0.4 million lower-value subscribers around the world.

One thing the company has failed to do, however, is figure out how to make a profit. On revenue of $391 million in the second quarter of 2024, FuboTV reported a net loss of $25.8 million, an adjusted EBITDA loss of $11.0 million, and a free cash flow loss of $35.3 million.

While losses are not unusual for a fast-growing company with big ambitions, there are plenty of other reasons to stay away from FuboTV. Even though the stock has fallen about 97% since its pandemic-era peak, investors should be extremely cautious.

1. A sports streaming juggernaut

FuboTV received a boost last month when a judge issued a temporary restraining order that Disney, foxAnd Warner Bros. Discovery of the launch of a joint sports streaming service that is set to launch in the fall. The new service, to be called Venu, will initially cost $42.99 per month, if it ever launches. That’s significantly cheaper than FuboTV’s standard price.

It is uncertain whether Venu will be allowed to launch at all. The three media giants involved are appealing the decision, which ultimately represents only a temporary delay. If Venu does launch, it will be much more difficult for FuboTV to attract and retain subscribers.

2. Growth is already slowing

FuboTV expects subscriber numbers in North America to grow by just 7% in fiscal year 2024. Revenue is expected to grow faster, at 18%, according to the company’s forecast.

Part of the problem is that FuboTV has minimal resources to invest in marketing. Sales and marketing expenses totaled $36 million in the second quarter, less than 10% of revenue. This will be an even bigger problem when Venu eventually launches, as the new service will have the marketing power of three media giants behind it.

There’s also a limit to how much FuboTV can increase average revenue per subscriber, even without a new competitor on the scene. Advertising revenue helps, but it’s growing slowly, accounting for less than 7% of total revenue.

3. A game that cannot go on forever

You may be wondering: How can FuboTV pay for the expensive rights to broadcast live sporting events when it’s burning cash at the same time? The answer is that the company is constantly selling new stock to keep operations going.

FuboTV raised $36.9 million from stock sales in the first six months of 2024. That’s down from $116.9 million in the first half of 2023, but the company’s cash balance also shrank significantly. FuboTV ended the second quarter with cash and cash equivalents of $155.2 million, down from $245.3 million a year ago.

The story continues

Here is a chart of FuboTV’s average diluted share count:

With FuboTV’s stock price below $2, raising enough money to cover losses through stock sales is quickly becoming unsustainable. After all, there has to be someone willing to buy all the shares the company dumps on the market.

Stay away from FuboTV

FuboTV’s shares could temporarily soar if Venu is put on hold, but the relief for shareholders will be temporary. More competition is inevitable, and each of the three media giants involved could develop its own rival service.

Even without increased competition, FuboTV continues to burn cash and dilute its shares to keep operating. While the company has become less unprofitable, subscriber growth is slowing and advertising is still a tiny additional source of revenue.

It can be tempting to bet on a turnaround, especially since the stock has fallen 97% since its peak. As a short-term speculation, FuboTV stock could make sense. But for long-term investors, it’s best to steer clear.

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Timothy Green holds positions in Walt Disney. The Motley Fool holds positions in and recommends Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.

FuboTV stock is down 97% from its high, but it’s still not a buy. Originally published by The Motley Fool