“$FUBO $2.56/share… that is still $2.56 you have left to sell before it goes to $0.”
At a client lunch the other day, I was asked if I thought fuboTV (FUBO) was really a $0. My response, without hesitation, was “Yes.”
It is one thing to make a short call, it is another to say the equity is worthless. So I understand where the question was coming from. But if anyone has any doubts, please see the title of this ‘Early Look’.
We first went short FUBO on 12/28/2020 and have been pounding the drum since… including the coveted post-Thanksgiving Early Look on 11/26/2021 when the stock was $21/share (Click Here).
As I am writing this, FUBO is trading at $2.56/share… so with the stock down 88%, I thought I would provide an update and a reminder that there is still 100% more to go!
Back to the Communications Grind…
Below is an excerpt from the 11/26/2021 ‘Early Look’ about fuboTV:
“For those who are less familiar, Fubo TV is a virtual multichannel video programming distributor (vMVPD), which positions itself as the leading OTT video service for sports fans. The company competes directly with other vMVPDs, including YouTube TV (Google), hulu w/live TV (Disney), and SlingTV (DISH Network). The vMVPD business is known for its poor unit economics due to rising programming costs, intense competition/low-switching costs (i.e., high customer churn rates), and questionable value proposition. The fundamental problem with this business is they lose money on every subscriber.”
There have been some notable developments since November:
- fuboTV acquired French streaming video service ‘Molotov’ $115M ($98.8M stock + $16.3M cash)
- Fubo Sportsbook launched in 4Q21 and reported negative revenue in 1Q22
- fuboTV eliminated the $64.99/mo ‘Starter Plan’ in favor of the $69.99/mo “Pro Plan” (Effectively raising price)
- Hulu increased the price of it’s live TV offering from $64.99 -> $69.99/mo, but included Disney+ and ESPN+ as part of it.
- New England Sports Network (NESN) launched a DTC streaming service billed monthly $29.99/mo (w/first month free) or an annual plan option at $329.99 ($27.49/mo) that includes 8 Red Sox tickets ($450 value)
- Sinclair Broadcast Group soft-launches direct-to-consumer regional sports streaming app in June 2022
- Local News is increasingly become available “free” through streaming aggregators like ‘The Roku Channel’
- Apple acquires MLB rights to exclusively air a weekly MLB Friday night doubleheader on AppleTV+ (March 2022) AND Major League Soccer (June 2022)
- YouTube TV Hits 5M subscribers (incl. Trials), up from 3M as of 3Q20.
On point #1: Whenever a company makes an acquisition after a period of rapid growth (i.e., before a big deceleration), it should be taken with some skepticism. In the case of FUBO, management pitched Molotov as an IP play, a way to acquire engineering talent they couldn’t attract organically (I wonder why?) and expand their international presence. While we can’t argue against these points, it also appears to serve the purpose of masking a slowdown in subscriber growth.
In 1Q22, FUBO reported 1,361,245 global subscribers (305,000 ROW / 1,056,245 NA), an increase of 45,812 compared to 4Q21. However, excluding growth from Molotov/ROW, North America fuboTV subscribers declined 73,562 QoQ vs. a reported 42,550 increase in 1Q21. Meanwhile, the ARPU on a ROW sub is ~$6 compared to ~$70 for NA. The sub loss is reflected in Non-GAAP platform bookings (leading indicator of revenue) falling below revenue for the first time in reported history in 1Q22. And based on our estimates, we believe SAC in 1Q22 blew out to ~2.0x NA ARPU vs. their targeted range of 1.0 – 1.5x (even though management says otherwise).
Molotov contributed 185,626 subscribers in 4Q21, bringing fuboTV’s YE global subscriber count to 1,361,245. In October 2020, Molotov disclosed “over 10 million registered users after only 3-years of existence” (Click Here) resulting in misleading headlines that Molotov has surpassed Netflix (who reported 6M subs). <- 10 million registered users is not comparable to 6M paying subscribers.
The deal that was originally announced on 11/9/2021 (Click Here for SEC Filing) for €164.3 million closed on 12/8/2021 (Click Here) but for a significantly lower price of €112.4 million <- $52M or 32% reduction in deal in 30-days begs the question of, what changed? It was originally expected to close in 1Q22, but fast-tracked to close before year-end.
On 11/9/2021 fuboTV disclosed that Molotov had 4M monthly active users (when the deal was announced), but on 2/23/2022 FUBO’s CEO said, “…Molotov there right behind Netflix with 3M monthly active users, the #2 app as of today in France”. <- The 1M decline is interesting (could be seasonal), but the comparison to Netflix is misleading considering Netflix just reported 10M subscribers in France AND Molotov is forecasted only to do $20-25M in revenue FY22. Also, we are not sure how management is defining MAUs for Molotov, but if we look at Mobile MAU data from Sensor Tower in France for February 2022 – Molotov had ~0.95M Users vs. Netflix at 13.6M.
On point #2: Lol
On points #3-9 : At $69.99/mo, fuboTV is tied with Hulu for the most expensive vMVPD service in the United States. From a programming perspective, fuboTV offers access to more RSNs (NESN, BEIN, MSG and A&T) than Hulu, but lacks programming from Warner (CNN, TBS, TNT) and A+E (History, Lifetime, A+E).
[Fun fact: fuboTV sneaks in a RSN fee in some local markets regardless of your interest in that content or not.]
Either way, we place greater importance on the Warner channels over the RSNs. AND with Hulu, you get access to all of the original content from Hulu and Disney+ for the same price. Meanwhile, as the bundle comes undone, even the RSNs are going DTC with NESN launching a streaming service that combines the digital with experiential to drive higher engagement.
Meanwhile, YouTubeTV is now cheaper than fuboTV at $64.99/mo and has just hit 5M subscribers (it probably helped that they had TBS/TNT for the NBA/NHL playoffs/finals). But the 5M is up from the 3M YouTube last reported in 3Q20, an increase of 2M versus the 666k fuboTV added over the same period.
In 2Q22, we saw YouTubeTV mobile app download growth accelerate past fuboTV, whose growth went negative in June 2022. With churn on the rise and gross acquisition down, we expect fuboTV to put up a very weak subscriber # in North America relative to their guidance and consensus.
The bottom line. fuboTV’s relative value is coming under significant pressure at the same time content costs per subscriber continue to outpace their ability to raise price.
fuboTV is a no-moat commodity business in an industry with low customer switching costs that is trying to take price into a recession to offset massive cash burn because they lose money on every subscriber. Perversely, it would help their cash burn if they lost subscribers. We estimate FUBO has ~$600M in total liquidity as of 1Q22, which at an ~$80M quarterly cash burn (btw… 1Q22 CFO before WC was -$106M) gets them to the end of 2023.
However, if we are right about subscriber acquisition trends and churn this quarter – the business model comes undone, and the stock price will be below $1/share before the year is over. And well on it’s way to $0 by the end of 2023.
[Note: fuboTV is hosting an investor day on 8/16/2022 – after they report Q2 earnings. Realistically speaking, we are not sure what they could do or say to change our fundamental conclusion. But it is an event worth paying attention to.]
If you would like to learn more about my research team's in-depth investing research please reach out to .
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 2.79-3.13% (bullish)
UST 2yr Yield 2.78-3.27% (bullish)
High Yield (HYG) 72.83-75.29 (bearish)
SPX 3 (bearish)
NASDAQ 10,850-11,680 (bearish)
RUT 1 (bearish)
Tech (XLK) 125-133 (bearish)
VIX 24.71-30.74 (bullish)
USD 105.40-109.18 (bullish)
Have a great day out there,
Andrew Freedman
Managing Director, Communications Sector Head
