Despite Strong Potential, Fubo Stock Is Risky Due to Cash Burn Issues

One of the most interesting streaming plays, fuboTV (NYSE:FUBO), is down substantially in the year thus far. Unfortunately, it looks unlikely FUBO stock will make a comeback anytime soon.

FuboTV is a TV service that streams over 70 channels. It is especially sports-centric and offers live access to major league games, including the NFL, NBA, MLB, NHL and more. The company was founded in January 2015 by David Gandler and Alberto Horihuela.

It has been growing rapidly and has 305,000 total paid subscribers. FuboTV offers its customers a wide range of channels, including news, movies, and kid’s programming. Additionally, fuboTV provides TV channels and sports programming for a monthly fee. Programming includes soccer, mixed martial arts, and more.

The company aims to offer more convenient and personalized content by eliminating the need for cable packages. In addition to being able to stream sports, they are also entering the world of sports betting.

The company is looking to tap into two markets expected to grow significantly in the next few years. However, in the last year, shares of FUBO have fallen 85%. Reasons for this are often tied to the selloff in growth stocks. The loss of subscribers for Netflix (NASDAQ:NFLX) has also played a role.

The latest earnings report also indicates that there is still a lot to do to avoid cash burn. It is also worth mentioning that the newly launched sportsbook service is not yet bringing in any revenue. So, FUBO stock is not a good buy at the moment.

Ticker Company Price
FUBO fuboTV Inc. $2.55

Latest FUBO Stock Report

The big narrative of earnings seasons is that fuboTV needs to chart a new path to managing expenses. The company reported a 102% increase in revenue to $242 million. However, net losses jumped to $140.8 million from $70.2 million in the year-ago period. This means adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) increased from $46.5 million to $105.5 million. That’s 127% year-over-year!

Many of the company’s expenses go toward subscriber-related costs, which went from $113 million to $246 million. Sales and marketing costs increased from $22 million to $46 million. The company’s operating expenses are at an all-time high. The figure jumped from $184.8 million to $377.3 million, leading to increased losses despite the sharp revenue hike.

Spanning just the past three months, this business is already seeing significant problems with spending more than they make. Overall, things aren’t looking too great. With an operating cash flow of negative $120 million and $456 million of cash remaining on the books, a turnaround will not be quick. The company needs more cash soon to survive until 2025 when management forecasts the enterprise will turn positive cash flow.

It is no secret that many companies struggle to keep finances afloat. In our current economy, it can be hard to turn a profit. There are two options the company can pursue. It can either go for an equity offering or move toward increasing subscription prices. Both are not great, but they might be necessary, considering the constant need for money.

Management Needs to Perform on the Bottom Line

FuboTV has grown immensely because of its wide breadth of offerings, but it must demonstrate that the business can be sustainable. Growing the prices may backfire and stall its revenue growth.

The stock price crash has made fuboTV the cheapest it has ever been. Regardless, the company has a questionable business model that might not persist. Investors might want to wait for fuboTV to show them it can handle costs before investing more money in FUBO stock.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.