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fuboTV Has Loads of Potential, But It’s No Slam Dunk, Says One Analyst

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fuboTV (FUBO) investors still have a couple weeks to wait before the live sporting events-streamer issues its fiscal Q3 2021 earnings release. In the meantime, let's take a few minutes to review what BTIG analyst W. Clark Lampen has to say about fuboTV in his initiation report out Tuesday.

Lampen starts out his report on fuboTV on a bright note, reminding investors that "FUBO has built one of the fastest-growing vMVPD (virtual multichannel video programming distributor) businesses," and predicting that the company will continue to grow subscribers at an accelerating pace, and putting "pressure" on traditional pay TV providers. The analyst also notes that fuboTV subscribers skew "higher income," meaning they're likely to be seen as more valuable than most other subscribers to companies advertising on fuboTV. (Translation: fuboTV should be able to charge higher rates for ads on its streaming programs).

That being said, Lampen warns that "the variable cost nature of the vMVPD business means profits and free cash flow will be hard to come by unless FUBO can more meaningfully scale up [its] Ad and Other (sports betting) operations." It's for this reason that, despite the company's tremendous growth rates (revenues up nearly triple in the last reported quarter, for example), the analyst has for the time being decided to "remain neutral in advance of [proof of] greater traction."

What might fuboTV report next month to get Lampen off the fence, and swing today's Neutral (i.e. Hold) rating over to a "buy?"

Merely seeing fuboTV continue to grow its subscriber base probably won't do the trick. Lampen says he already expects the company to capture "a growing chunk of cable subscribers that are shifting from linear to streaming options," and that seems a safe assumption given that "share gains have accelerated over the last two years" and "churn appears to be finally ticking down." Perversely, it even seems that growing the customer count might hurt Lampen's opinion of the stock, if new subscribers aren't quite as "higher income" as the current customer base (and thus less attractive to advertisers).

(Read more: fuboTV Expected to Reach 2 Million Subscribers By 2025, Says Analyst)

As the analyst explains: "rising pay TV subscriber share is valuable only so long as new subs aren’t dilutive to... advertising monetization rates."

Instead, what Lampen would most like to see in next month's earnings news (and accordingly, what investors should also look for), would be some combination of three things:

  • An "improvement in the sequential trend of hours watched per [monthly active user], which we look at as an important indicator for the health of the ad business."

  • "Additional market access announcements," which would give more opportunities to promote sports betting in the future.

  • And of course, any management comments on the sports betting business launching, which is expected to take place in Q4.

The better those three things go, the better the news should be for fuboTV stock going forward.

Overall, Lampen is among a minority on Wall Street. Of the 9 current analyst reviews, 7 say Buy and 2 suggest Hold, all coalescing to a Strong Buy consensus rating. The average price target stands at $44.63, suggesting room for ~55% uptick over the next 12 months. (See FUBO stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Top Smart Score, a newly launched tool that unites all of TipRanks’ equity insights.

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.