FuboTV(NYSE: FUBO) has established itself as a leading streaming service for live sports. The company has racked up nearly 1.5 million subscribers in North America, with each paying $85.69 per month on average, along with another 0.4 million lower-value subscribers around the world.
One thing the company has failed to do, though, is figure out how to turn a profit. On $391 million in revenue during 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 losing money isn't out of the ordinary for a fast-growing company with big ambitions, there are multiple other reasons to stay far away from FuboTV. Even with the stock down around 97% from its pandemic-era peak, investors should be extremely cautious.
1. A sports streaming juggernaut
FuboTV got a shot in the arm last month when a judge granted a preliminary injunction blocking Disney, Fox, and Warner Bros. Discovery from launching a joint sports streaming service scheduled to go live this fall. The new service, set to be called Venu, will be priced at $42.99 per month initially if it's allowed to see the light of day. That dramatically undercuts FuboTV's standard pricing.
Whether Venu will be allowed to launch is anyone's guess. The three media giants involved are appealing the decision, which is ultimately a temporary delay. If Venu does launch down the road, winning and keeping subscribers will become far more challenging for FuboTV.
2. Growth is already slowing
FuboTV expects to grow its North America subscriber count by just 7% in fiscal 2024. Revenue will grow at a faster 18% rate, according to the company's outlook.
Part of the problem is that FuboTV has minimal resources to invest in marketing. Sales and marketing spending totaled $36 million in the second quarter, less than 10% of revenue. This becomes an even bigger problem if Venu ultimately launches, since the new service will have the marketing muscle of three media giants behind it.
There's also a limit to how far FuboTV can push up average revenue per subscriber, even without a new competitor on the scene. Advertising revenue is helping the cause, but it's growing slowly and accounts for less than 7% of total revenue.
3. A game that can't go on forever
You may be asking yourself: How does FuboTV pay for expensive rights to stream live sports events when it's been burning cash? The answer is that the company continually sells new shares to keep the lights on.
FuboTV raised $36.9 million in the first six months of 2024 selling shares. That's down from $116.9 million in the first half of 2023, but the company's cash balance also dwindled considerably. FuboTV ended the second quarter with cash and cash equivalents of $155.2 million, down from $245.3 million one year prior.
Here's chart of FuboTV's average diluted share count:
FUBO Average Diluted Shares Outstanding (Quarterly) data by YCharts
With FuboTV trading below $2 per share, raising enough cash to cover losses by selling stock is quickly becoming unsustainable. There has to be someone willing to buy all the shares the company is dumping on the market, after all.
Stay away for FuboTV
Shares of FuboTV could temporarily soar if Venu is shelved, but any relief to shareholders will be temporary. More competition is inevitable, and any of the three media giants involved could develop their own competing service.
Even without increased competition, FuboTV continues to burn cash and dilute shareholders to keep things going. The company has become less unprofitable, but subscriber growth is slowing and advertising is still a tiny source of additional revenue.
It can be tempting to bet on a turnaround, especially with the stock down 97% from its peak. As a short-term speculation, FuboTV stock might make sense. But for long-term investors, it's best to stay away.
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Timothy Green has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.
