FUBO – many catalysts at play for long term growth
FuboTV (NYSE:FUBO) is reporting Q4 earnings after the bell today after strong earnings from NFLX and ROKU. FUBO is looking to become much more diverse than just a sports subscription service as it moves into the high growth area of sports betting with the unique advantage of being able to broadcast a live event while simultaneously allowing subscribers to bet on that event.
Based on Analysts estimates, the consensus EPS forecast for the quarter is $-0.53. The reported EPS for the same quarter in 202 was $-0.68.
But the key data everyone will be looking for this quarter is not the earnings, but the growth in their subscriber base. If you look at the comparison with Netflix (NFLX) based on the Market Capitalization and the number of subscribers,
|Ticker||Market Cap||Subscribers (estimated)||Market Cap /Subscriber||Subscription Growth rate|
Based on this metric, FUBO appears to be overpriced compared to NFLX, but this is justified based on almost three times the growth in subscribers on a year-to-year basis. Additionally, this model doesn’t account for the potential of additional areas of growth such as the sports betting diversification.
In December, FUBO announced the acquisition of Balto Sports, which offers fantasy sports betting platform and then, they announced their intent to purchase interactive gaming company Vigtory. Based on these acquisitions, FUBO expects to be operational with their sportsbook offering by the end of the year. What this does is add a new wrinkle to how FUBO may be valued going forward. If we look at DraftKings (DKNG) as a model for comparison, the consensus analyst estimates for DraftKings is a growth rate in earnings at 53% this year, with the potential to turn profit by 2022.
So really, what’s so unique about FUBO is the cross-pollination between a subscription service and a sports betting platform and I see significant synergies between the two. For example, growth in subscriber base also points to a bigger potential customer base for sports betting, which in turn offers the potential for higher engagement for the subscription. Therefore, going back to the Market Cap / Subscriber comparison, if FUBO can achieve a higher growth rate in subscription as a result of this diversification in 2021, it has the potential to achieve a significantly better growth rate over a five year period to 2026 compared to Netflix and also compared to its own projected subscriber growth rate, and if that growth rate beats expected projections, I see significant upside for FUBO over the rest of 2021.