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2021-05-21

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fuboTV: Building A Business In Interactive Television

Summary fuboTV's stock price continues to be down from company-specific and macroeconomic concerns.

fuboTV: Building A Business In Interactive Television

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{"i18n":{"language":"zh_CN"},"data":{"magic":2,"id":139380345,"tweetId":"139380345","gmtCreate":1621592157887,"gmtModify":1631891189414,"author":{"id":3569925582252060,"idStr":"3569925582252060","authorId":3569925582252060,"authorIdStr":"3569925582252060","name":"WilsonAng","avatar":"https://static.tigerbbs.com/6714edd3d10aa6ed40e648975f4fa743","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":7,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":1,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body>Great!</body></html>","htmlText":"<html><head></head><body>Great!</body></html>","text":"Great!","highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/139380345","repostId":1167417774,"repostType":4,"repost":{"id":"1167417774","pubTimestamp":1621591524,"share":"https://www.laohu8.com/m/news/1167417774?lang=&edition=full","pubTime":"2021-05-21 18:05","market":"us","language":"en","title":"fuboTV: Building A Business In Interactive Television","url":"https://stock-news.laohu8.com/highlight/detail?id=1167417774","media":"seekingalpha","summary":"Summary\n\nfuboTV's stock price continues to be down from company-specific and macroeconomic concerns.","content":"Summary\n<ul>\n <li>fuboTV's stock price continues to be down from company-specific and macroeconomic concerns.</li>\n <li>The company's latest earnings, however,&nbsp;continue to prove critics wrong as fuboTV continues its march toward profitability.</li>\n <li>fuboTV is taking market share in the vMVPD space.</li>\n <li>All fuboTV Key Performance Indicators point towards the company being a buy.</li>\n</ul>\nThe last time I wroteabout fuboTV(NYSE:FUBO)this past March, the stock was trading at $28.91 and it was still in the midst of getting pummeled after generalmarket correctionover investor fears about bond yields rising. fuboTV also hasa great deal of skepticism voiced by criticsabout fuboTV's business model over the last year that still drags down fuboTV's stock.\n<img src=\"https://static.tigerbbs.com/af006ab770f390a48bfac68f4e8d1aa9\" tg-width=\"635\" tg-height=\"403\">Data byYCharts\nHowever, the latest earnings by fuboTV continues proving the critics wrong and the report wasso impressivethat the stock closed almost 10% higher the following day after earnings were released. Investors were particularly impressed by the company's surprising increase in subscribers. Normally, fuboTV loses some subscribers from the fourth quarter to the first quarter but not this year.\nSo, is it time for investors to jump back into this stock after the shellacking it has taken since the beginning of this year? This article will explore fuboTV's business, examine earnings and give insights on whether the stock is a buy at the current price.\nWhy Investors Were Impressed By Earnings\n<img src=\"https://static.tigerbbs.com/3cde929ba81db88e000a4b25102c4eee\" tg-width=\"640\" tg-height=\"340\">Source:fuboTV 1Q2021 Earnings Slides\nAs stated previously, investors were really impressed with subscriber growth which grew to 590,430 subs or 105% year-over-year compared to only 24% growth for the entirevirtual MVPDmarket as reported in Nielsen Media Research over the same period. This means fuboTV is currently taking market share at a time that other virtual MVPDs are losing market share.\n<blockquote>\n In 2019, we were roughly around 3% market share of virtual MVPDs. As of the end of the first quarter, we are closer to 5.8%. And again, I think that, that will continue to accelerate as we continue to improve on operating our business based on the data that we're collecting.Source: CEO David Gandler - Needham Technology &amp; Media Broker Conference Call\n</blockquote>\nOn a sequential basis, subscribers were up 43K or 8% from Q4, while in the previous year subscribers declined 28K or down almost 9%. Apparently, this is the first time that fuboTV gained subscribers moving from Q4 to Q1.\n<blockquote>\n As for the first time, we overcame historical first quarter seasonal trends and reported sequential revenue and sequential subscriber growth. Consumers are increasingly cutting the cord to go virtual, and they are choosing fuboTV.Source: CEO David Gandler -fuboTV Q1 2021 Earnings Conference Call\n</blockquote>\nWhy is fuboTV Taking Share?\nRecently, the CEO David Gandler addressed why fuboTV is taking share on the Needham Technology &amp; Media Broker Conference Call hosted by Needham analyst Laura Martin. The answer essentially broke down into two reasons.\n<ol>\n <li>fuboTV is committed to building a true sports first service, while MVPD competitors are far more focused on general entertainment or scripted content. fuboTV has been slowly adding regional sports networks over time, and because those networks are expensive, many of fubo's competitors have been shying away from investing in regional sports networks content. The proof is in the pudding. The actual results show fubo is gaining a greater share of the sports customer because of their sports branding and sports focused strategies.</li>\n <li>fuboTV has been differentiating by developing improved customization and personalization capabilities. For instance, fuboTVallows viewers to choose their favorite teamsto automatically record. fuboTV users have a calendar view option. fuboTV on Apple TV has amulti-view option, which allows users to watch four channels at once. fuboTV has anon-demand \"Lookback\" featurethat enables a viewer to go back in time and watch previously aired games for up to 72 hours after the original air time. Last but not least, fuboTV is still the only vMVPD that allows viewers towatch specific sporting events in 4K.</li>\n</ol>\nOne big criticism that some people that are bearish on fuboTV have is that they believe thatthe vMVPD business model is not viablebecause of questions about the ability to attract a large number of cord cutters. There are some people that reason that cord cutters are primarily motivated to move to CTV because they can save money by getting rid of their cable TV subscriptions and switching to popular streaming services, such as Netflix(NASDAQ:NFLX)or Disney Plus(NYSE:DIS)accomplishes that goal.\nHowever, the numbers that fuboTV is producing up until now seems to disprove that theory and shows fubo's strategy is working.\nAdvertising\nAdvertising is extremely important to fuboTV as the company views advertising as a key component of profitability. Advertising is currently 11% of the company's total revenue and is increasingly helping to expand thecontribution margin.\n<img src=\"https://static.tigerbbs.com/8d7ec32054926aaef41f6907cc94c44c\" tg-width=\"640\" tg-height=\"353\">Source:fuboTV Q1 2021 Earnings Presentation\nQ1 advertising revenue growth was 206% to close to $13 million with ARPU per month rising 57% to $7.11. This means that fuboTV is making $85 in ARPU per year and Roku is currently doing around $35 ARPU per year (TTM). So fuboTV is already doing around 2.5X Roku's ARPU and Roku's ARPU is considered top notch in advertising. Another thing of note is that a rising advertising ARPU on a platform is usually an indication that the users of that platform are being seen by advertisers as being increasingly more valuable.\nWhy is advertising on fuboTV valuable to marketers?\nWell, the biggest reason might be that the primary content on fuboTV is sports and sports broadcasts are known to attract a very large segment of the men in the 18-34 age demographic, which is a group that not only has a reputation of being among the most difficult to reach by mass media but is alsothe most coveted demographic to advertise into.\nJust to illustrate the demographics that sports attracts, in 2020,ESPN was the #1 cable network in primefor Males aged 18-34, Males aged 18-49, Males aged 25-54, Persons aged 18-34, and Persons aged 18-49. fuboTV likely has very similar demographics to ESPN.\nA complimentary reason that advertisers are attracted to fuboTV is that93 percent of fuboTV viewers watch on a connected TV device, and 90 percent watch their favorite content live.\nOne reason why live content is important for fuboTV is that there is a ton of competition withinvMVPDsthat offer mostly scripted content for TV and movie channels. There is a lot less competition within vMVPDs that have a focus on providing more live content like sports and news.\nfuboTV has more of a brand that focuses on live content than their competitors in theConnected TV(CTV) space. Consumers seem to be looking for that one central live content provider to satisfy their sports viewing needs and it looks like viewers are increasingly concluding that fuboTV is the best at satisfying those needs. That is the likely reason why fuboTV is grabbing market share from competitors in the CTV space.\nAdvertisers have not only been noticing the fuboTV market share gains in CTV but have also been noticing that the share gains are coming in that 18 to 49 demographic that they really want to reach in the CTV space. CTV advertising has also been becoming increasingly popular with advertisers because the advertising tools for CTV have the ability to target those demographics that marketers want to reach far more effectively than onlinear TV. So fuboTV is becoming a very attractive way for advertisers to effectively target persons in the 18 - 49 age range, with a big emphasis on men in the 18 - 34 age range.\nfuboTV is really serious about expanding their advertising capabilities to reach that valuable primarily male 18 - 49 age demographic. Recently, fuboTV announced the launch of abranded content studio for advertisers at 2021 IAB NewFrontsand a partnership with LiveRamp to enhance its addressable advertising capabilities.\n<blockquote>\n So that studio is a way for us to sort of provide more of a 360 approach for advertisers and give them that extra edge over another competitor that they might have that may not be able to speak to our customer base the same way. And I think what's important is that we are heavily male oriented. And as you know, it's very difficult to reach men 18 to 49. And this is an area where I think we're going to continue to improve, which is why the gaming component of our business is also so important, which we believe we'll continue to engage males 18 to 49 and sort of increase that base.Source: CEO David Gandler -Needham Technology &amp; Media Broker Conference Call\n</blockquote>\nRevenues and Profitability\n<img src=\"https://static.tigerbbs.com/32621f508a64833aa5c847fe1b4008a9\" tg-width=\"640\" tg-height=\"339\">Source:fuboTV Q1 2021 Shareholder Letter\nfuboTV Q1 2021 revenues more than doubled, growing 135% to $119.7M. Subscription revenue increased 131% YoY to $107.1 million, while Average Revenue Per User (ARPU) per month also jumped, up 28% to $69.09. Adjusted Contribution Margin was positive 5.3%, up 230 bps from 3.0% in Q1 2020.\n<img src=\"https://static.tigerbbs.com/d2ee96c6f19bb656256a647979fcb7d0\" tg-width=\"640\" tg-height=\"350\">Source: fuboTV Q1 2021 Earnings Presentation\nOne of the main things that some people take issue with fuboTV has to do with the company having negative to very low gross margins. Currently, fuboTV is a structurally unprofitable company because it has variable costs that are greater than the price of their product, consequently, even at scale, fuboTV would have a profitability problem because scaling the business would only cover costs that are fixed.\nfuboTV uses an alternative to the gross margin concept by reporting thecontribution margin, which excludes all fixed costs and is simply measured by subtracting the variable costs of sales from revenues. The contribution margin is actually a better way to assess fuboTV currently versus using gross margins because the contribution margin metric is directly measuring the impact of variable costs on the company. As long as the contribution margin trends in a favorable manner, the company is moving toward profitability.\nIn the recentNeedham Technology &amp; Media Conference, CEO David Gandler highlighted that the original goal of fuboTV was to have subscription revenue to pay for the content and the ad revenue, as well as other service attachments to be the profitability drivers.\nAs recent results show, fuboTV is starting to deliver on that original goal as advertising continues growing higher as a percentage of total revenue. The one thing I was unaware of is that wagering was not included in the original business model for fuboTV, which projected 30% gross margins in the long term. So, if wagering succeeds, it is expected to have additional upside in margins.\nOperating cash flow for fuboTV in Q1 was negative $53.9 million, improving more than $20 million compared to the fourth quarter 2020. This includes the impact of payments associated with wagering.\nOperating expenses for the quarter were up 80% year-over-year, far lower than the 135% increase in revenue over the same period.\nEarnings per share in Q1 were negative $0.59 and included $0.02 negative impact from expenses incurred for the launch of the wagering business and $0.02 negative impact from the amortization of the debt discount related to senior convertible notes.\nGiven the multiple tailwinds, coupled with FUBO's growing market share and sequentially lower Subscriber Acquisition Costs (SAC), the company did accelerate investments in employees, technology and infrastructure during the quarter. This resulted in an expected expense increase in absolute dollars year over year, however, the expense costs were significantly lower in proportion to revenue, resulting in a material year-over-year improvement in the Adjusted EBITDA margin from -72.3% to -38.8%. So fuboTV showed progress towards profitability in the Q1 quarter.\nBalance Sheet\n<img src=\"https://static.tigerbbs.com/8e3551d6d74e8ff3559abbd258eca5c3\" tg-width=\"635\" tg-height=\"403\">fuboTV ended the quarter with $465 million of cash, cash equivalents and restricted cash.\nfuboTV has adebt to equityof 0.48. Generally, a debt to equity ratio less than 1.0 is less risky than firms whose debt to equity ratio is greater than 1.0.\nfuboTV has aQuick Ratioor Acid Test of 2.33. A good Quick Ratio is any number greater than 1.0. A business has a quick ratio of 1.0 or greater, typically means the business is healthy and can pay its liabilities.\nGuidance\n<img src=\"https://static.tigerbbs.com/a2c83ed0a62be8882fe5407820e01c38\" tg-width=\"640\" tg-height=\"413\">Source: fuboTV Q1 2021 Earnings Presentation\nAn Interactive Product Development Company\nAnalyst Laura Martin of Needham at the recent Needham Technology &amp; Media Conference call made a simple comment that helped me to really understand the fuboTV business.\nEssentially, fuboTV's core business makes no money and the company uses data to create different interactive products that can add $10 to $15 to $20 of monthly revenue per customer, thereby raising the ARPU over time.\n<blockquote>\n [Think of] fubo as the razor blade. You started the core business basically makes no money, and then you do these add-on services like upsells and advertising and wagering, all of which at like 80% margins to reach your awesome 70% male customer base that's 40 years old. So 20 years younger than linear TV. So it seems like you're executing that.Laura Martin -Needham Technology &amp; Media Conference May 17, 2021 11:45 AM ET\n</blockquote>\nOne of the building blocks that fuboTV is currently building into its interactive television experience is fubo free to play predictive games, which should be going beta sometime in June. Fubo believes free to play games will enhance the sports streaming experience and also provide a bridge between its video service andsportsbook.\nThe engine that makes everything go for fuboTV is data and the fubo free-to-play games will allow the company to better understand the types of games that people like to play. It will tell the company which types of sports people like, which types of plays that people like, the viewer level of engagement, the impact on viewership, and the impact on advertising sales. This data will allow fuboTV to highlight future games that people may like. It will also likely help fuboTV to develop better wagering products for its sportsbook down the road too.\n<blockquote>\n But right now, I think that the way I look at fubo is more of a mini Amazon ecosystem. We have people that are spending 129 hours on the platform. That is an enormous amount of time that people are spending with us so it's in our best interest to learn what they like, learn what they don't like, learn what they want, give them what they want, see if we can create a more immersive experience.Source: David Gandler - -Needham Technology &amp; Media Conference May 17, 2021 11:45 AM ET\n</blockquote>\nDavid Gandler has also mentioned that it is fuboTV's goal to emulate the success of a Spotify(NYSE:SPOT)or Netflix, which is generally considered to have been accomplished through using data to build their product development programs. I have recently started viewing fuboTV as more than just another vMVPD and much more as an interactive TV product development company.\nfuboTV Sportsbook\nIn Q1, fuboTV took action to accelerate the launch of fubo Sportsbook by completing the acquisition of sports betting and interactive gaming companyVigtoryfor a total of $37.2 million.\nI think what attracted fuboTV to Vigtory is that the company owned a Sportsbook that had already signed amarket access dealin Iowa through Casino Queen. In addition, Fubo has also recently signed deals to become an authorized gaming operator of Major League Baseball (MLB) and the National Basketball Association (NBA). The NBA and MLB deals include access to official league data and logos within fubo Sportsbook once it is rolled out.\nThere are some people though thatview fuboTV's plans as being unrealistic, and that is part of the reason that I consider fuboTV a very speculative company. There really is a chance that fuboTV Sportsbook could flop for various different reasons ranging from regulatory to consumers simply not liking the experience. I think that is why fubo plans on gathering data with free to play games to research the things consumers might be receptive to.\nIf everything goes well, thenfuboTV will launch its sports betting divisionand Sportsbook app in Q4 of this year.\nNFL is the Game That Matters\nOne other criticism that I have seen many people make about fuboTV is some of the gaps in sports coverage with the biggest one being that because fuboTV didn't have Turner networks, it had missed out on a big portion of March Madness.\nOne thing I have recently learned about fuboTV is that the true building blocks for building a sports focused vMVPD in the USA is the NFL (and to a slightly lesser extent college football) and soccer is the required sport worldwide. Almost all other sports content is \"nice to have\" content that can be tacked on as the company scales. CEO David Gandler alludes to the importance of the NFL in the following comment.\n<blockquote>\n I think the NFL is really the only media content that has the type of audience pull or aggregation that we're accustomed to seeing. And as you know, we didn't have Turner. So March madness didn't have the type of impact that most people had believed would occur at fubo would lose subscribers in the first quarter.Source: CEO David Gandler -Needham Technology &amp; Media Conference May 17, 2021\n</blockquote>\nValuation\n<img src=\"https://static.tigerbbs.com/155f8d9c704b6cf239f0074efb8f33a9\" tg-width=\"618\" tg-height=\"412\">I decided to put DISH Network(NASDAQ:DISH)in the above comparison because Dish owns a competing vMVPD in Sling. Sling, however, is losing market share and Dish is a very mature company that investors don't see much upside in, which is likely why its valuation on a Price to Sales basis is so low.\nRoku(NASDAQ:ROKU)is comparable to fuboTV in the CTV advertising business. The Roku comparison is interesting because fuboTV's ARPU metrics are much better than the Roku ARPU metrics and I think fuboTV has more upside in advertising than even Roku. Roku, however, has far better profitability than fuboTV in almost any way one wants to look at it and Roku is a more mature, far less risky company at its current stage of development.\nDraftKings(NASDAQ:DKNG)is similar to fuboTV's future Sportsbook business. Obviously, DraftKings is much further ahead in developing its Sportsbook and has far better profitability as far as gross margins are concerned. I view fubo and DraftKings as relatively early stage companies with similar risks on the wagering side of the business.\nI view fuboTV as a lot more speculative than DraftKings. I also think the market views fuboTV as being more risky because there is a great deal of doubt and uncertainty that the fuboTV vMVPD business can be made profitable using only subscriptions and advertising.\nI find most valuation models to be just about useless when it comes to speculative stocks like fuboTV because no one can accurately predict whether this company will ever become profitable or not and that will determine whether the stock has big upside or big downside from current prices.\nHowever, Wall Street analysts don't get paid to say they can't really put out a price target on a company. So let's look at analysts' price targets.\n<img src=\"https://static.tigerbbs.com/28caab1d76bf893e85775e00332ad7ed\" tg-width=\"464\" tg-height=\"393\">Source:Yahoo Finance\nThere is a relatively wide spread in price targets with the low at $25 and the high at $60 but I am not a big believer in price targets for a company that is as speculative as fuboTV. The truth of the matter is that if fuboTV shows concrete evidence that the idea of it becoming an interactive CTV product development company is viable, then the stock price will likely blow past that $60 price target on the upper end like it was nothing.\nIf, however, fuboTV's advertising initiatives fail or fuboTV finds it too difficult to establish its Sportsbook and wagering business, investors will likely lose enthusiasm for the stock and the price could sink into the single digits.\nConclusion\nThe way that I invest in speculative companies is I find the key metrics to follow and then monitor them. If key metrics are trending positively, then I am comfortable buying the stock, whether or not the market bids the stock up or down.\nIf, however, I see multiple key metrics trending down, especially when the metrics are being measured year-over-year to eliminate seasonality, and I begin thinking a worsening trend is more than just a blip that the company can recover from, then I will begin entertaining the idea of selling the stock.\nSo what are the key metrics to pay attention to with fuboTV?\nWell, the CEO has mentioned that the top Key Performance Indicators (KPIs) that all of fuboTV managers aim for are subscriber growth, contribution margin and ad sales. I consider that those three metrics are also good for investors to monitor fuboTV's progress.\nAll three of those above metrics did very well in Q1 and currently fuboTV seems to be trending towards eventual profitability. So I consider the stock a buy at current prices and a strong buy if the stock price should fall further but that recommendation only applies for investors that have room for a speculative company in their portfolio. Conservative investors, on the other hand, might want to give fuboTV a pass.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>fuboTV: Building A Business In Interactive Television</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nfuboTV: Building A Business In Interactive Television\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-05-21 18:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4430386-fubotv-building-a-business-in-interactive-television>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nfuboTV's stock price continues to be down from company-specific and macroeconomic concerns.\nThe company's latest earnings, however, continue to prove critics wrong as fuboTV continues its ...\n\n<a href=\"https://seekingalpha.com/article/4430386-fubotv-building-a-business-in-interactive-television\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{},"source_url":"https://seekingalpha.com/article/4430386-fubotv-building-a-business-in-interactive-television","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1167417774","content_text":"Summary\n\nfuboTV's stock price continues to be down from company-specific and macroeconomic concerns.\nThe company's latest earnings, however, continue to prove critics wrong as fuboTV continues its march toward profitability.\nfuboTV is taking market share in the vMVPD space.\nAll fuboTV Key Performance Indicators point towards the company being a buy.\n\nThe last time I wroteabout fuboTV(NYSE:FUBO)this past March, the stock was trading at $28.91 and it was still in the midst of getting pummeled after generalmarket correctionover investor fears about bond yields rising. fuboTV also hasa great deal of skepticism voiced by criticsabout fuboTV's business model over the last year that still drags down fuboTV's stock.\nData byYCharts\nHowever, the latest earnings by fuboTV continues proving the critics wrong and the report wasso impressivethat the stock closed almost 10% higher the following day after earnings were released. Investors were particularly impressed by the company's surprising increase in subscribers. Normally, fuboTV loses some subscribers from the fourth quarter to the first quarter but not this year.\nSo, is it time for investors to jump back into this stock after the shellacking it has taken since the beginning of this year? This article will explore fuboTV's business, examine earnings and give insights on whether the stock is a buy at the current price.\nWhy Investors Were Impressed By Earnings\nSource:fuboTV 1Q2021 Earnings Slides\nAs stated previously, investors were really impressed with subscriber growth which grew to 590,430 subs or 105% year-over-year compared to only 24% growth for the entirevirtual MVPDmarket as reported in Nielsen Media Research over the same period. This means fuboTV is currently taking market share at a time that other virtual MVPDs are losing market share.\n\n In 2019, we were roughly around 3% market share of virtual MVPDs. As of the end of the first quarter, we are closer to 5.8%. And again, I think that, that will continue to accelerate as we continue to improve on operating our business based on the data that we're collecting.Source: CEO David Gandler - Needham Technology & Media Broker Conference Call\n\nOn a sequential basis, subscribers were up 43K or 8% from Q4, while in the previous year subscribers declined 28K or down almost 9%. Apparently, this is the first time that fuboTV gained subscribers moving from Q4 to Q1.\n\n As for the first time, we overcame historical first quarter seasonal trends and reported sequential revenue and sequential subscriber growth. Consumers are increasingly cutting the cord to go virtual, and they are choosing fuboTV.Source: CEO David Gandler -fuboTV Q1 2021 Earnings Conference Call\n\nWhy is fuboTV Taking Share?\nRecently, the CEO David Gandler addressed why fuboTV is taking share on the Needham Technology & Media Broker Conference Call hosted by Needham analyst Laura Martin. The answer essentially broke down into two reasons.\n\nfuboTV is committed to building a true sports first service, while MVPD competitors are far more focused on general entertainment or scripted content. fuboTV has been slowly adding regional sports networks over time, and because those networks are expensive, many of fubo's competitors have been shying away from investing in regional sports networks content. The proof is in the pudding. The actual results show fubo is gaining a greater share of the sports customer because of their sports branding and sports focused strategies.\nfuboTV has been differentiating by developing improved customization and personalization capabilities. For instance, fuboTVallows viewers to choose their favorite teamsto automatically record. fuboTV users have a calendar view option. fuboTV on Apple TV has amulti-view option, which allows users to watch four channels at once. fuboTV has anon-demand \"Lookback\" featurethat enables a viewer to go back in time and watch previously aired games for up to 72 hours after the original air time. Last but not least, fuboTV is still the only vMVPD that allows viewers towatch specific sporting events in 4K.\n\nOne big criticism that some people that are bearish on fuboTV have is that they believe thatthe vMVPD business model is not viablebecause of questions about the ability to attract a large number of cord cutters. There are some people that reason that cord cutters are primarily motivated to move to CTV because they can save money by getting rid of their cable TV subscriptions and switching to popular streaming services, such as Netflix(NASDAQ:NFLX)or Disney Plus(NYSE:DIS)accomplishes that goal.\nHowever, the numbers that fuboTV is producing up until now seems to disprove that theory and shows fubo's strategy is working.\nAdvertising\nAdvertising is extremely important to fuboTV as the company views advertising as a key component of profitability. Advertising is currently 11% of the company's total revenue and is increasingly helping to expand thecontribution margin.\nSource:fuboTV Q1 2021 Earnings Presentation\nQ1 advertising revenue growth was 206% to close to $13 million with ARPU per month rising 57% to $7.11. This means that fuboTV is making $85 in ARPU per year and Roku is currently doing around $35 ARPU per year (TTM). So fuboTV is already doing around 2.5X Roku's ARPU and Roku's ARPU is considered top notch in advertising. Another thing of note is that a rising advertising ARPU on a platform is usually an indication that the users of that platform are being seen by advertisers as being increasingly more valuable.\nWhy is advertising on fuboTV valuable to marketers?\nWell, the biggest reason might be that the primary content on fuboTV is sports and sports broadcasts are known to attract a very large segment of the men in the 18-34 age demographic, which is a group that not only has a reputation of being among the most difficult to reach by mass media but is alsothe most coveted demographic to advertise into.\nJust to illustrate the demographics that sports attracts, in 2020,ESPN was the #1 cable network in primefor Males aged 18-34, Males aged 18-49, Males aged 25-54, Persons aged 18-34, and Persons aged 18-49. fuboTV likely has very similar demographics to ESPN.\nA complimentary reason that advertisers are attracted to fuboTV is that93 percent of fuboTV viewers watch on a connected TV device, and 90 percent watch their favorite content live.\nOne reason why live content is important for fuboTV is that there is a ton of competition withinvMVPDsthat offer mostly scripted content for TV and movie channels. There is a lot less competition within vMVPDs that have a focus on providing more live content like sports and news.\nfuboTV has more of a brand that focuses on live content than their competitors in theConnected TV(CTV) space. Consumers seem to be looking for that one central live content provider to satisfy their sports viewing needs and it looks like viewers are increasingly concluding that fuboTV is the best at satisfying those needs. That is the likely reason why fuboTV is grabbing market share from competitors in the CTV space.\nAdvertisers have not only been noticing the fuboTV market share gains in CTV but have also been noticing that the share gains are coming in that 18 to 49 demographic that they really want to reach in the CTV space. CTV advertising has also been becoming increasingly popular with advertisers because the advertising tools for CTV have the ability to target those demographics that marketers want to reach far more effectively than onlinear TV. So fuboTV is becoming a very attractive way for advertisers to effectively target persons in the 18 - 49 age range, with a big emphasis on men in the 18 - 34 age range.\nfuboTV is really serious about expanding their advertising capabilities to reach that valuable primarily male 18 - 49 age demographic. Recently, fuboTV announced the launch of abranded content studio for advertisers at 2021 IAB NewFrontsand a partnership with LiveRamp to enhance its addressable advertising capabilities.\n\n So that studio is a way for us to sort of provide more of a 360 approach for advertisers and give them that extra edge over another competitor that they might have that may not be able to speak to our customer base the same way. And I think what's important is that we are heavily male oriented. And as you know, it's very difficult to reach men 18 to 49. And this is an area where I think we're going to continue to improve, which is why the gaming component of our business is also so important, which we believe we'll continue to engage males 18 to 49 and sort of increase that base.Source: CEO David Gandler -Needham Technology & Media Broker Conference Call\n\nRevenues and Profitability\nSource:fuboTV Q1 2021 Shareholder Letter\nfuboTV Q1 2021 revenues more than doubled, growing 135% to $119.7M. Subscription revenue increased 131% YoY to $107.1 million, while Average Revenue Per User (ARPU) per month also jumped, up 28% to $69.09. Adjusted Contribution Margin was positive 5.3%, up 230 bps from 3.0% in Q1 2020.\nSource: fuboTV Q1 2021 Earnings Presentation\nOne of the main things that some people take issue with fuboTV has to do with the company having negative to very low gross margins. Currently, fuboTV is a structurally unprofitable company because it has variable costs that are greater than the price of their product, consequently, even at scale, fuboTV would have a profitability problem because scaling the business would only cover costs that are fixed.\nfuboTV uses an alternative to the gross margin concept by reporting thecontribution margin, which excludes all fixed costs and is simply measured by subtracting the variable costs of sales from revenues. The contribution margin is actually a better way to assess fuboTV currently versus using gross margins because the contribution margin metric is directly measuring the impact of variable costs on the company. As long as the contribution margin trends in a favorable manner, the company is moving toward profitability.\nIn the recentNeedham Technology & Media Conference, CEO David Gandler highlighted that the original goal of fuboTV was to have subscription revenue to pay for the content and the ad revenue, as well as other service attachments to be the profitability drivers.\nAs recent results show, fuboTV is starting to deliver on that original goal as advertising continues growing higher as a percentage of total revenue. The one thing I was unaware of is that wagering was not included in the original business model for fuboTV, which projected 30% gross margins in the long term. So, if wagering succeeds, it is expected to have additional upside in margins.\nOperating cash flow for fuboTV in Q1 was negative $53.9 million, improving more than $20 million compared to the fourth quarter 2020. This includes the impact of payments associated with wagering.\nOperating expenses for the quarter were up 80% year-over-year, far lower than the 135% increase in revenue over the same period.\nEarnings per share in Q1 were negative $0.59 and included $0.02 negative impact from expenses incurred for the launch of the wagering business and $0.02 negative impact from the amortization of the debt discount related to senior convertible notes.\nGiven the multiple tailwinds, coupled with FUBO's growing market share and sequentially lower Subscriber Acquisition Costs (SAC), the company did accelerate investments in employees, technology and infrastructure during the quarter. This resulted in an expected expense increase in absolute dollars year over year, however, the expense costs were significantly lower in proportion to revenue, resulting in a material year-over-year improvement in the Adjusted EBITDA margin from -72.3% to -38.8%. So fuboTV showed progress towards profitability in the Q1 quarter.\nBalance Sheet\nfuboTV ended the quarter with $465 million of cash, cash equivalents and restricted cash.\nfuboTV has adebt to equityof 0.48. Generally, a debt to equity ratio less than 1.0 is less risky than firms whose debt to equity ratio is greater than 1.0.\nfuboTV has aQuick Ratioor Acid Test of 2.33. A good Quick Ratio is any number greater than 1.0. A business has a quick ratio of 1.0 or greater, typically means the business is healthy and can pay its liabilities.\nGuidance\nSource: fuboTV Q1 2021 Earnings Presentation\nAn Interactive Product Development Company\nAnalyst Laura Martin of Needham at the recent Needham Technology & Media Conference call made a simple comment that helped me to really understand the fuboTV business.\nEssentially, fuboTV's core business makes no money and the company uses data to create different interactive products that can add $10 to $15 to $20 of monthly revenue per customer, thereby raising the ARPU over time.\n\n [Think of] fubo as the razor blade. You started the core business basically makes no money, and then you do these add-on services like upsells and advertising and wagering, all of which at like 80% margins to reach your awesome 70% male customer base that's 40 years old. So 20 years younger than linear TV. So it seems like you're executing that.Laura Martin -Needham Technology & Media Conference May 17, 2021 11:45 AM ET\n\nOne of the building blocks that fuboTV is currently building into its interactive television experience is fubo free to play predictive games, which should be going beta sometime in June. Fubo believes free to play games will enhance the sports streaming experience and also provide a bridge between its video service andsportsbook.\nThe engine that makes everything go for fuboTV is data and the fubo free-to-play games will allow the company to better understand the types of games that people like to play. It will tell the company which types of sports people like, which types of plays that people like, the viewer level of engagement, the impact on viewership, and the impact on advertising sales. This data will allow fuboTV to highlight future games that people may like. It will also likely help fuboTV to develop better wagering products for its sportsbook down the road too.\n\n But right now, I think that the way I look at fubo is more of a mini Amazon ecosystem. We have people that are spending 129 hours on the platform. That is an enormous amount of time that people are spending with us so it's in our best interest to learn what they like, learn what they don't like, learn what they want, give them what they want, see if we can create a more immersive experience.Source: David Gandler - -Needham Technology & Media Conference May 17, 2021 11:45 AM ET\n\nDavid Gandler has also mentioned that it is fuboTV's goal to emulate the success of a Spotify(NYSE:SPOT)or Netflix, which is generally considered to have been accomplished through using data to build their product development programs. I have recently started viewing fuboTV as more than just another vMVPD and much more as an interactive TV product development company.\nfuboTV Sportsbook\nIn Q1, fuboTV took action to accelerate the launch of fubo Sportsbook by completing the acquisition of sports betting and interactive gaming companyVigtoryfor a total of $37.2 million.\nI think what attracted fuboTV to Vigtory is that the company owned a Sportsbook that had already signed amarket access dealin Iowa through Casino Queen. In addition, Fubo has also recently signed deals to become an authorized gaming operator of Major League Baseball (MLB) and the National Basketball Association (NBA). The NBA and MLB deals include access to official league data and logos within fubo Sportsbook once it is rolled out.\nThere are some people though thatview fuboTV's plans as being unrealistic, and that is part of the reason that I consider fuboTV a very speculative company. There really is a chance that fuboTV Sportsbook could flop for various different reasons ranging from regulatory to consumers simply not liking the experience. I think that is why fubo plans on gathering data with free to play games to research the things consumers might be receptive to.\nIf everything goes well, thenfuboTV will launch its sports betting divisionand Sportsbook app in Q4 of this year.\nNFL is the Game That Matters\nOne other criticism that I have seen many people make about fuboTV is some of the gaps in sports coverage with the biggest one being that because fuboTV didn't have Turner networks, it had missed out on a big portion of March Madness.\nOne thing I have recently learned about fuboTV is that the true building blocks for building a sports focused vMVPD in the USA is the NFL (and to a slightly lesser extent college football) and soccer is the required sport worldwide. Almost all other sports content is \"nice to have\" content that can be tacked on as the company scales. CEO David Gandler alludes to the importance of the NFL in the following comment.\n\n I think the NFL is really the only media content that has the type of audience pull or aggregation that we're accustomed to seeing. And as you know, we didn't have Turner. So March madness didn't have the type of impact that most people had believed would occur at fubo would lose subscribers in the first quarter.Source: CEO David Gandler -Needham Technology & Media Conference May 17, 2021\n\nValuation\nI decided to put DISH Network(NASDAQ:DISH)in the above comparison because Dish owns a competing vMVPD in Sling. Sling, however, is losing market share and Dish is a very mature company that investors don't see much upside in, which is likely why its valuation on a Price to Sales basis is so low.\nRoku(NASDAQ:ROKU)is comparable to fuboTV in the CTV advertising business. The Roku comparison is interesting because fuboTV's ARPU metrics are much better than the Roku ARPU metrics and I think fuboTV has more upside in advertising than even Roku. Roku, however, has far better profitability than fuboTV in almost any way one wants to look at it and Roku is a more mature, far less risky company at its current stage of development.\nDraftKings(NASDAQ:DKNG)is similar to fuboTV's future Sportsbook business. Obviously, DraftKings is much further ahead in developing its Sportsbook and has far better profitability as far as gross margins are concerned. I view fubo and DraftKings as relatively early stage companies with similar risks on the wagering side of the business.\nI view fuboTV as a lot more speculative than DraftKings. I also think the market views fuboTV as being more risky because there is a great deal of doubt and uncertainty that the fuboTV vMVPD business can be made profitable using only subscriptions and advertising.\nI find most valuation models to be just about useless when it comes to speculative stocks like fuboTV because no one can accurately predict whether this company will ever become profitable or not and that will determine whether the stock has big upside or big downside from current prices.\nHowever, Wall Street analysts don't get paid to say they can't really put out a price target on a company. So let's look at analysts' price targets.\nSource:Yahoo Finance\nThere is a relatively wide spread in price targets with the low at $25 and the high at $60 but I am not a big believer in price targets for a company that is as speculative as fuboTV. The truth of the matter is that if fuboTV shows concrete evidence that the idea of it becoming an interactive CTV product development company is viable, then the stock price will likely blow past that $60 price target on the upper end like it was nothing.\nIf, however, fuboTV's advertising initiatives fail or fuboTV finds it too difficult to establish its Sportsbook and wagering business, investors will likely lose enthusiasm for the stock and the price could sink into the single digits.\nConclusion\nThe way that I invest in speculative companies is I find the key metrics to follow and then monitor them. If key metrics are trending positively, then I am comfortable buying the stock, whether or not the market bids the stock up or down.\nIf, however, I see multiple key metrics trending down, especially when the metrics are being measured year-over-year to eliminate seasonality, and I begin thinking a worsening trend is more than just a blip that the company can recover from, then I will begin entertaining the idea of selling the stock.\nSo what are the key metrics to pay attention to with fuboTV?\nWell, the CEO has mentioned that the top Key Performance Indicators (KPIs) that all of fuboTV managers aim for are subscriber growth, contribution margin and ad sales. I consider that those three metrics are also good for investors to monitor fuboTV's progress.\nAll three of those above metrics did very well in Q1 and currently fuboTV seems to be trending towards eventual profitability. So I consider the stock a buy at current prices and a strong buy if the stock price should fall further but that recommendation only applies for investors that have room for a speculative company in their portfolio. Conservative investors, on the other hand, might want to give fuboTV a pass.","news_type":1},"isVote":1,"tweetType":1,"viewCount":467,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}