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The argument against fuboTV (FUBO) generally rests on its perceived lack of ability to eventually become a profitable company. Its detractors see the business as based on wafer thin margins and faced with competition from bigger and better funded entities offering similar services.
The retort, however, along with the sport-focused streamer’s increasingly impressive set of metrics is that the company is well-positioned to benefit from a rising secular trend – the move from linear TV to CTV (connected TV). That said, Berenberg’s Zachary Silverberg thinks this opportunity opens up several avenues all at once.
“fuboTV is favorably positioned within three secular growth trends in media: cord cutting, Connected TV (CTV) ads, and online wagering,” the analyst said. “We believe its sports niche, focus on technology, and wagering offering will drive stronger subscriber/profit growth than the market currently assumes.”
Silverberg expects traditional pay TV services will continue to see subscriber counts dwindle as more people move over to CTV offerings. Side by side with the subscriber migration, adverting budgets will move over too. This is already happening and FUBO has been reaping the rewards. In 2Q21, ad revenue increased by 281% year-over-year, rising from 10% of total revenue to make up 13%.
FUBO being a sport specialist also helps here as a Berenberg survey shows that 90% of current pay TV subscribers watch sports on a regular basis, a boon for FUBO as more people “cut the cord.” Silverberg anticipates these new additions will stay on, retained by FUBO’s recommendation engine and proprietary marketing tools.
The last bit of the puzzle is reserved for FUBO’s entrance into the growing online wagering field. A sportsbook will launch this quarter and is an “ideal strategic fit for a sports-focused streaming product.”
With all the above pushing the business forward, by 2025, Silverberg expects FUBO to have over 2 million subscribers. Through the same year, the analyst also expects revenue to grow at a CAGR of nearly 60%, “well above market expectations.” Scale and growth in high-margin revenue sources will eventually drive profitability, and beforehand - by 2023 - Silverberg anticipates fuboTV will become “EBITDA positive.”
To this end, the analyst initiated coverage on FUBO with a Buy rating and $50 price target. Investors are looking at returns of ~67% from current levels.
Silverberg’s colleagues are mostly tuned in to the same channel; Barring 1 fence sitter, all 6 other recent reviews are positive, culminating in a Strong Buy consensus rating. Going by the $44.63 average price target, shares are expected to be changing hands for a 49% premium a year from now. (See FUBO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.