fuboTV (NYSE:FUBO) Surprises With Q3 Sales

Max Juang

Fri, Nov 1, 2024, 5:47 AM 4 min read

Revenue: $386.2 million vs analyst estimates of $376.8 million (2.5% beat)
EPS: -$0.16 vs analyst estimates of -$0.18 ($0.02 beat)
EBITDA: -$27.56 million vs analyst estimates of -$36.61 million (~$9 million beat)
Gross Margin (GAAP): 14%, up from 6.1% in the same quarter last year
Operating Margin: -15.2%, up from -26% in the same quarter last year
EBITDA Margin: -7.1%, up from -19.1% in the same quarter last year
Free Cash Flow was -$3.33 million compared to -$29.5 million in the same quarter last year
Domestic Subscribers: 1.61 million at quarter end
Market Capitalization: $573 million

Company Overview

Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) is a video streaming service specializing in live sports, news, and entertainment content.

Media

The advent of the internet changed how shows, films, music, and overall information flow. As a result, many media companies now face secular headwinds as attention shifts online. Some have made concerted efforts to adapt by introducing digital subscriptions, podcasts, and streaming platforms. Time will tell if their strategies succeed and which companies will emerge as the long-term winners.

Sales Growth

Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, fuboTV grew its sales at an incredible 68.6% compounded annual growth rate. This is a useful starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. fuboTV’s annualized revenue growth of 31.4% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.

This quarter, fuboTV reported robust year-on-year revenue growth of 20.3%, and its $386.2 million of revenue topped Wall Street estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to grow 10.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and shows the market believes its products and services will see some demand headwinds.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While fuboTV’s free cash flow broke even this quarter, the broader story hasn’t been so clean. Over the last two years, fuboTV’s demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin averaged negative 11%, meaning it lit $11.02 of cash on fire for every $100 in revenue.

fuboTV broke even from a free cash flow perspective in Q3. This result was good as its margin was 8.3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict fuboTV’s cash conversion will improve to break even. Their consensus estimates imply its free cash flow margin of negative 7% for the last 12 months will increase by 7.9 percentage points.

Key Takeaways from fuboTV’s Q3 Results

We were impressed by how significantly fuboTV blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid quarter. The stock traded up 2.3% to $1.78 immediately after reporting.

Sure, fuboTV had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.