Blogs -A Fubo Q3 Earnings Beat Means That The Market Will Have To Relent

A Fubo Q3 Earnings Beat Means That The Market Will Have To Relent


November 03, 2021

author

Beth Kindig

Lead Tech Analyst

According to critics, the riskiest quarter for fuboTV (FUBO) ("Fubo") was Q2 due to the off-season for major sports in the United States. The company went on to report a 196% YoY jump in its revenue to $130.9M. It was primarily helped by the strong growth in subscription revenue and advertising revenue. Subscription revenue grew by 189% to $114.4M and advertising revenue grew by 281% YoY to $16.5M. It was the fastest advertising sales growth in the company's history.

So much for a tough quarter - but how did Fubo accomplish this? That will be important to look at as the market has overlooked Fubo for its growth and the company has not been rewarded for the ongoing beats and guidance raise. We should clarify and say we think it's the retail market that has overlooked the company while institutions are quietly moving off the sidelines with ownership doubling since February from 229 to 470 institutions.

https://images.prismic.io/bethtechnology/ddce3add-0ed4-4281-bc05-3fe00eb9c9af_45714056-16360248927806342.png?auto=compress,format

Source: Ycharts

Below, we will look at Fubo's recent history to form an opinion on why Q3 could be quite strong. We also pulled Apptopia data on downloads and sessions to look at engagement trends. Lastly, we revisit the major catalyst in Fubo's future: sports betting.

Why Fubo Crushed Q2

To call Q2 a seasonally light quarter for sports would mean only the United States is being factored into the analysis. This mistake was also made in Q1 when critics predicted the downfall of Fubo based on March Madness, a tournament that has roughly 17 million viewers.

Fubo's roots are in soccer. Fubo has the exclusive rights in the United States to stream the remaining 70 Qatar World Cup 2022 qualifying matches of the South American Football Confederation. This began in June. Obviously, Fubo will not capture this full TAM, but even a small percentage can have a larger impact than a tournament like March Madness.

Fubo was also able to score some major league baseball deals, such as a carriage agreement with Marquee Sports Network which gives access to the Chicago Cubs games.

Advertising grew from 10% of revenue to 13% of revenue for Fubo in Q2. We have seen the company re-accelerate from 70% during the Covid quarter to 281% in the most recent quarter (that is serious acceleration). Although those high triple-digit numbers can't last forever, it shows how the demand for advertising on the platform will help offset licensing costs as time goes on.

https://images.prismic.io/bethtechnology/255d7451-3e70-41b2-a105-22db95953eed_45714056-1636024933110173.png?auto=compress,format

Source: Fubo earnings reports; chart from I/O Fund

The average revenue per user (ARPU) increased 30% YoY to $71.43 and advertising average revenue per user showed a substantial 62% YoY growth to $8.70. Increasing ARPU and an increasing number of subscribers is a solid combination to have when taking market share as it shows the company does not need to discount the product to be competitive.

In addition to the advertising opportunity, the company is also the fastest-growing SVOD platform and is taking market share from competitors. The company had total subscribers of 681,721 (up 138% YoY) at the end of the June quarter, a net addition of 91,291 from the previous quarter. Meanwhile, according to the data from Statista, the global SVOD market in 2021 is expected to grow 23% YoY to $70.8B in 2021 and the US SVOD market is expected to grow 18% YoY to $32.1B.

This supports our original thesis in December that live sports audiences are the last to cut the cord and are the most coveted audience right now for this reason.

The streaming increased in the last quarter as monthly active users (MAUs) watched about 134 hours per month on average, which is reasonable considering Q2 2020 was a quarter where many people spent increased time indoors.

https://images.prismic.io/bethtechnology/38bfc801-eea5-4fbb-ba7d-b9d86fe6c301_45714056-16360249331979277.png?auto=compress,format

Source: Fubo earnings reports; chart from I/O Fund

Quick Note on Gross Margins

We have noted many times that the company is in a high growth stage and the street is discounting the company for its weak gross margins. However, the company's margins are improving.

In the last earnings call, it was mentioned by the CEO, "50% gross margins will be our long-term target. We will also look to target about $10 to $15 of advertising ARPU based on that 50% margin."

The net loss came at ($94.9M) when compared to ($73.6M) for the same quarter last year and adjusted EBITDA came at ($47.4M) when compared to ($41.9M) for the same period of the previous year. The adjusted EBITDA margin was -36% in Q2 2021 compared to -95% in Q2 2020.

https://images.prismic.io/bethtechnology/91d139bb-1cee-4db0-919a-039f7a8fe56d_45714056-1636024933517916.png?auto=compress,format

Source: Earnings Presentation

The company's launch of Fubo Sportsbook is an important event to track in Q4. We've covered the sports betting opportunity in detail, including the projection that the industry could reach $155 billion by 2024. fuboTV has a better position than its rivals as they own their audience and it's an upsell rather than a new user acquisition loop. The company acquired Balto Sports and Vigtory to help release the free-to-play and sports wagering. When sports betting launches, we think we will then see Fubo's full monetization potential by combining subscriptions, advertising, and betting for global sports on one platform.

fuboTV CEO David Gandler predicts that nearly 40M to 50M people in the USA will subscribe to digitally delivered video networks in the next five years. He believes that his company can target about 10% of the market.

Q3 Earnings Preview with Apptopia Data

Fubo increased their full-year revenue guidance to $560-$570M, representing a 116% YoY growth at the mid-point, up from the previous guidance of $520-$530M. The subscribers for full-year 2021 are estimated at 910,000 to 920,000, up from the previous guidance of 830,000 to 850,000.

Third-quarter revenue guidance is between $140-$144M, representing 132% YoY growth. Subscribers are expected to be 810,000 to 820,000. The consensus analysts' revenue estimates are close to the higher end of management guidance.

https://images.prismic.io/bethtechnology/e56ba4f0-f5c1-4a45-963c-4778cb941ece_45714056-1636024933238687.png?auto=compress,format

Source: Fubo earnings reports and Ycharts

In the past, we analyzed app downloads and sessions using Apptopia data to look at the health of the mobile app. Please keep in mind, this is not an earnings call as there can be other earnings surprises in terms of gross margins and profits that can cause a stock to sell off after an earnings report. We are also reporting on downloads and sessions, whereas Fubo reports subscribers.

According to the Q3 data from Apptopia, Fubo's downloads accelerated 98% YoY and 82% QoQ to 2.29M.

https://images.prismic.io/bethtechnology/b8c5a7ce-707c-493e-a255-e9379c397fd6_45714056-163602493333265.png?auto=compress,format

Source: Apptopia

The sessions data shows 161% YoY growth and 43% QoQ growth to 176.79M. Please note, downloads show us a glimpse as to new activity but they do not represent subscribers who already have the app downloaded. Sessions help to provide more color, if we assume sessions were comparatively equal across subscribers in previous quarters.

https://images.prismic.io/bethtechnology/e6e31a39-772c-4ae7-b185-31cc3f4d1bd3_45714056-1636024933362514.png?auto=compress,format

Source: Apptopia

The data below shows a spike in September. The start of the NFL season likely contributed, as well as exclusive coverage for the South American World Cup 2022 Qualifiers (CONMEBOL) in the US.

https://images.prismic.io/bethtechnology/97d23c14-38b9-46bc-958c-970e5340d4e1_45714056-16360249333873687.png?auto=compress,format

Source: Apptopia

Fubo also announced its free-to-play games and FanView live stats feature for its September CONMEBOL matches. The players who answer questions correctly during the match get points and have the chance to win cash prizes. The integration of free games and FanView increased the engagement in fuboTV during its beta testing in June and this might also have led to the spike in demand in September.

In the words of David Gandler, co-founder and CEO of Fubo, "We believe this will mark the first time any company has integrated live streaming television, free games and live stats within the same platform, on the big screen. With free games and our upcoming Fubo Sportsbook real-money wagering app, we intend to deliver a truly interactive streaming experience, one that we expect will improve engagement and retention to fuboTV while also driving advertising revenue."

https://images.prismic.io/bethtechnology/c7d3ec96-7f47-478c-a732-0402c855b765_45714056-16360249333976412.png?auto=compress,format

Source: Apptopia

The most important thing we see in this data is that fuboTV broke out of its trendline on monthly sessions and downloads as the month of September marks an all-time high for the year. We will get a quarterly report from the company yet the data helps substantiate on a more granular level that Fubo is capable of sizable growth in a single month. The key takeaway is that September is 46% higher than the previous all-time high met in January during the Super Bowl.

As stated, downloads and sessions don't guarantee an earnings beat, however, as a long-term buy and hold investor, growth like this is what I look for. I also look for evidence that the thesis I formed is playing out. Therefore, I see this data as a positive and the flurry of announcements around sports betting is also a positive.

More Fubo Announcements …

While the market is aptly rewarding DraftKings with a 1-year forward P/S of 11, Fubo has quietly been gathering strength in sports betting while at a 1-year forward valuation of 4.4. We covered why we like Fubo better than DraftKings.

In the third quarter, Fubo completed the Market Access Agreement in Arizona. It also received approval to offer Online Sports Wagering in two states namely, Iowa and Arizona. On November 3rd, the company announced that Fubo Sportsbook is live in Iowa.

Fubo Sportsbook also entered a multi-year partnership with the New York Jets. There will also be a Fubo Sportsbook Lounge at MetLife Stadium for the NFL team's home games.

Fubo Gaming partnered with the Cleveland Cavaliers to promote its brands through various marketing avenues. More recently, it also announced a partnership with NASCAR (The National Association for Stock Car Auto Racing) to become the authorized gaming partner of NASCAR.

Fubo's distribution is also growing. The company announced in September that fuboTV will be available on VIZIO SmartCast TVs. Earlier in June, it launched in LG Smart TVs. fuboTV also announced a distribution agreement with AT&T SportsNet Rocky Mountain.

ROOT Sports and fuboTV announced a distribution agreement in September which will give fuboTV customers access to Seattle Mariners, Seattle Krakken, and Portland Trail Blazer Games. We think these regional adds are important to watch as one metro area has the capability to boost Fubo's user base.

Conclusion

According to the data, September was Fubo's best month this year by nearly 46% (i.e., it's not even a close call with January's Superbowl month). This does not guarantee quarterly performance but we certainly like to see growth trending upwards and we like it when this happens concurrently with new catalysts, such as sports betting. If you think of where this company was during the Covid quarters when live sports was shut down, the comeback has been quite incredible.

On that note, tech growth investing is not for the faint of heart and Fubo has certainly tested investors who prefer clearer financials. However, I've been analyzing OTT tech startups since 2011 and there are certain indicators I look for in terms of analyzing the strength of a product. Fubo hits on many of those indicators and I think investors will either relent if Fubo puts up a Q3 beat or they will get left behind in the dust once sports betting launches. One thing is clear, Fubo is not letting up.

Gains of up to 403% from our Free Newsletter.

Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+344% on Nvidia

+403% on Bitcoin

+218% on Roku

*as of March 15, 2022

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 324% on Zoom, 601% on Nvidia, 445% on Bitcoin, and 4-digits on an alt-coin. The I/O Fund is audited annually to prove it’s one of the best performing Funds on the market with returns that beat Wall Street funds. 

beth

More To Explore

Newsletter

https://images.prismic.io/bethtechnology/93644c8f-e9e6-4b61-944f-d7ebc957628a_Palantir+Stock+Surges+From+Artificial+Intelligence+Platform.jpg?auto=compress,format

Palantir Stock Surges From Artificial Intelligence Platform

Palantir’s Q4 earnings confirmed an acceleration in its US commercial business as it closed out its first GAAP profitable year. Shares are reflecting the optimism surrounding Palantir’s commercial seg

February 20, 2024
AI Chip

AI Driving Acceleration For Big 3 Cloud Stocks

Big Tech’s participation in the market’s push to all-time highs is becoming increasingly narrow, with Nvidia, Meta, Microsoft and Amazon serving as the primary contributors to 2024’s rally.

February 13, 2024
Apple Can't Save This Tech Rally

Apple Can’t Save This Tech Rally

In this article, I lay out both the bull and bear cases for 2024 and beyond. Interestingly, both are calling for a level of volatility in 2024 that will, at least, retrace the rally we’ve seen since N

January 31, 2024
Coinbase, Robinhood: Examining The Impact Of Spot Bitcoin ETFs

Coinbase, Robinhood: Examining The Impact Of Spot Bitcoin ETFs

The SEC approved nearly a dozen spot Bitcoin ETFs on January 10 in what was heralded as a “watershed” moment for the crypto industry, opening the door for investors to gain exposure to Bitcoin without

January 30, 2024
Tesla Store

Tesla Q4 Earnings Preview: Margins Likely To Slip Again

Tesla’s Q4 earnings are on tap after the market close on January 24, closing up a year in which aggressive price cuts helped the automaker top Q4 delivery estimates reach a new record and narrowly bea

January 23, 2024
Social Media Stocks: One Metric Shows Meta's Clear Leadership

Social Media Stocks: One Metric Shows Meta’s Clear Leadership

Social media stocks Meta (META), Pinterest (PINS), and Snapchat (SNAP) enjoyed strong gains in 2023 as the broader ad market stabilized and fundamentals improved. Social media ad spend is expected to

January 16, 2024
Nvidia Building

Five Top Stocks Of 2023: Year In Review

The Nasdaq 100 capped off 2023 with a return of +53.8%, erasing 2022’s losses and recording its highest annual return since 1999. This year had countless winners, but 5 stocks surprised and shocked th

January 09, 2024
Ad Spending Growth to Accelerate in 2024

Ad Spending Growth to Accelerate In 2024

Ad-tech stocks have generally enjoyed strong returns in 2023, buoyed by a rather fierce tech rally. Ad spending growth showing initial signs of stabilizing in the back half of the year, with ad spend

January 01, 2024
My Firm called the Bitcoin's Bottom; Here is Where the Price Goes Next

My Firm called the Bitcoin’s Bottom; Here is Where the Price Goes Next

Bitcoin is susceptible to a noisy, bifurcation between bulls and bears with extreme statements, such as: “Bitcoin will go to a $1 million” or “Bitcoin is a ponzi scheme and will go to $0.” The truth i

December 21, 2023
Palantir Building

Palantir, Three Other Cloud Stocks Poised For An Acceleration In 2024

Cloud stocks have been a mixed bag for investors heading into the end of the year, as a handful of names — Confluent, Sprinklr, HashiCorp, Bill, Paycom — plunged following their earnings reports with

December 19, 2023
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio of 30 positions, a private forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks