While the stock market has been doing incredibly well this year, one company that has continued to struggle is fuboTV (NYSE: FUBO). The sports streaming provider faces intense competition and is unprofitable, making investors hesitant to take a chance on it. The stock is currently down about 47% since the start of the year.
But with the company recently locking up some promising agreements -- and with the stock trading at a modest valuation -- could this prove to be a bargain buy in a few years as fuboTV expands its operations?
An agreement with The Athletic and more diverse offerings
The name of the game in the streaming world is agreements: the more of them a streaming company has, the more exclusive opportunities it can take advantage of, which can potentially lead to more customers signing up for its services.
In October, sports media company The Athletic announced that fuboTV would be its live TV streaming partner, and that it would "be integrated into live game blogs and additional content on The Athletic's leading sports platform as a go-to sports streaming destination." While this may not directly provide consumers with an incentive to sign up for fuboTV's streaming services, it can help put the company in front of more people, and by proving that it can offer attractive services, lead to greater sales growth.
FuboTV has also announced new stand-alone premium subscription services. Customers will now have the opportunity to sign up for packages such as FanDuel Sports Network or NBA League Pass without having to own a base channel plan with fuboTV. By allowing this, fuboTV can provide customers with greater flexibility, enabling them to keep their costs lower than they otherwise would be.
The company is also looking into offering "skinny bundles" that may appeal to value-oriented customers. Through these more diverse offerings, fuboTV can reach a wider range of consumers, which it may have been missing out on.
Growth is impressive, but a dark cloud looms over the business
FuboTV last reported earnings on Nov. 1, and its sales numbers remained strong. For the period ended Sept. 30, the company's sales grew by 20% year over year, to $386 million. The business remains unprofitable, but there is hope that it is on the right path.
Operating expenses for the period totaled $445 million and rose by just 10% from the same period last year. As a result, its operating loss of $59 million was an improvement from the $83 million loss fuboTV incurred in the prior-year period.
But the big question is whether it can continue on that trajectory as competition intensifies in the streaming industry. In August, the company was able to stop Walt Disney, Fox, and Warner Bros. Discovery from coming together and forming a joint venture that would have led to a comprehensive sports streaming option, which could have seriously jeopardized the ability for fuboTV to compete against such an offering.
It is, however, just a temporary injunction. It's by no means a guarantee that fuboTV will be able to fend off the consolidation of larger streaming services or these companies coming together in some way in the future. Streaming companies are struggling to post profits, especially when it comes to sports, where licensing deals can be extremely expensive. And that makes consolidation a seemingly necessary option.
Is fuboTV stock worth buying on weakness right now?
FuboTV's growing product offerings and its partnership with The Athletic are positive developments for the business, which could lead to greater revenue growth. But it's hard to look past the company's lack of profitability and the intense competition fuboTV faces.
Many consumers are strapped for cash due to inflation these days and can't afford expensive streaming options, regardless of how good they may be. Consolidation in the streaming industry looks inevitable, and with a possible three-headed giant of Disney, Warner Bros., and Fox to worry about, I don't like fuboTV's odds of success. At the very least, the company may need to offer lower prices to win over customers, but that could undo the progress it has made in shrinking its losses.
Although the streaming stock is down big this year and it has a seemingly low market cap when compared to the other streaming giants in the industry -- less than $600 million -- fuboTV isn't a bargain buy. It's trading at a discounted price, and that's because the business is facing many risks. Investors have serious doubts about its ability to be competitive and turn a profit. Until that changes, you may be better off simply steering clear of fuboTV stock, even if it does dip lower in value.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
