By James Rogers
Shares of FuboTV fell 6.5% on Wednesday, despite the profitability roadmap laid out by the streaming service at its virtual investor day on Tuesday.
The pullback came after the company’s stock closed up 45% at $6.35 on Tuesday.
The streaming service was downgraded to neutral from outperform by Wedbush on Wednesday. At the investor day, FuboTV /zigman2/quotes/201214080/composite FUBO +7.91% gave a number of targets that it intends to reach in 2025. These include being free cash flow positive and achieving an adjusted EBITDA margin of positive 15% after years of losses, according to Wedbush.
“Despite all of the company’s bold targets relayed at its investor day, fuboTV needs to raise capital and cut cash burn rapidly or it will be out of cash within a year,” wrote Wedbush analyst Michael Pachter. “While we are confident that they can do both, it is uncertain how dilutive the capital raise will be and how rapidly their cash burn will improve.”
Pachter acknowledged that the company has a solid head start in offering live sports programming to its subscribers and has a thriving and growing advertising business.
FuboTV recently said it will ‘no longer pursue’ in-house sports betting on its own. In a letter to shareholders that accompanied its second-quarter earnings earlier this month the company said it is taking steps to “de-risk” its Fubo Sportsbook business and will no longer go down the wagering path independently. “As a result, we’re evaluating strategic opportunities for our wagering business,” it said.
The company presents a compelling opportunity for a sports wagering company to partner with an established sports television broadcaster, according to Pachter, but pointed to broader concerns. “However, slowing subscriber growth, fierce competition, inflation, and rising content costs all make us less confident over the near-term,” he added.
Wedbush raised its FuboTV price target to $6 from $5.
In a note released on Tuesday Evercore analyst Shweta Khajuria highlighted the company’s investor day focus on driving profitable growth. “Not only did management reiterate their 2025 target of being FCF positive, but they also provided 2025 targets for total Subscribers to reach 2.6MM, Ad ARPU to reach $15 – $20 (vs. $8 in 2021), and OpEx to reach 85% of Revenue (vs. ~140% in 2021),” she wrote. “The company expects $75MM in cost savings through 2025 (driven by synergies across acquired businesses and outsourcing headcount to India) and $100MM in capital raise in 2024 (ex-wagering business, which is under strategic review) to reach positive EBITDA and FCF by 2025.”
Evercore maintained its outperform rating for FuboTV, but raised its price target to $8 from $5. “Our revised estimates do not get us to the company’s 2025 targets—we will be watching for successful execution,” wrote Khajuira.
FuboTV shares have fallen 61.8% this year, compared with the S&P 500 Index’s /zigman2/quotes/210599714/realtime SPX -1.72% decline of 10.3%.
Of eight analysts surveyed by FactSet, two have buy ratings on FuboTV, five have hold ratings and one has a sell rating.