FuboTV’s (NYSE:FUBO) value for most consumers is questionable, making the longer-term outlook of FUBO stock appear to be negative.
fuboTV has two main problems. First, it does not appear to be meaningfully cheaper than traditional paid TV options, including cable satellite, and Fios from Verizon (NYSE:VZ) or Frontier (OTC:FTRCQ). Secondly, Fubo’s biggest attraction is enabling cord cutters to watch live sporting events, but the service does not appear to offer channels that show most of the games of popular professional teams.
Not Much Cheaper Than Traditional Pay TV Options
The biggest attraction of cord cutting is the fact that it’s meaningfully cheaper than paying the typically $120-$150 per month bill for cable, Fios, or satellite. As a cord cutter, I can tell you that saving money is the main reason that my wife and I have cut the cord.
When we had Frontier’s Fios offering, we paid about $120per month for internet and TV. Now we pay about $60 for internet from Frontier, about $12 per month for Netflix (NASDAQ:NFLX), and about $13 per month for Disney’s (NYSE:DIS) Hulu, Disney+, and ESPN+ package. That adds up to a total of $85 month, meaning I’m saving around $35 per month versus my previous Frontier bill.
Fubo’s basic plan, which the company calls its Family Plan, costs $65 per month. Throw in another $60 per month (at least) for internet service, and you’re not really saving much, if anything, compared with traditional pay TV. That lack of savings greatly undermines the bull case for FUBO stock.
Moreover, to get a high number of sports channels (the Family tier appears to offer only ESPN, Fox Sports, Fox Sports 2,0 the NFL Network and the Golf Channel), consumers have to pay another $10.99 per month (for the Sports Plus package) or $7.99 per month (for the Fubo Extra option), making Fubo’s offering basically the same price as the traditional cable, satellite and Fios offerings.
Lacking Local Sports Options
I would consider paying up to $25 per month if I could watch every game of my two favorite sports teams, the Philadelphia Phillies and the New York Jets. (I should note that I live in the Dallas area, so I can’t get any of those teams’ games on local TV stations).In past years, I have paid about $5 per month to watch Phillies’ games on the internet.
I’m sure millions of other sports fans, especially cord-cutters and those who don’t live anywhere near their favorite teams, would also run to sign up for such an offering.
But Fubo TV doesn’t appear to provide full coverage of any local sports teams. Moreover, it doesn’t seem to even offer a sports-only package.(It actually used to only broadcast sports for $7 per month, but it adopted its current cable-like business model a few years ago).
A Better Idea for Fubo
If Fubo could find a way to offer the games of individual sports teams, even just for those living outside of the teams’ geographic markets, I think it would do very well.
Even if it provided a package of national sports channels for $12-$18 per month, I believe that it could get tens of millions of subscribers. A national news-channel offering for $12-$15 per month could also generate a great deal of revenue. (I miss a few cable news channels, and I’m sure many cord cutters are in the same boat).
But with Fubo’s current model, I don’t think it will rise above 4-5 million subscribers. In addition to failing to offer a better deal than cable, Fubo is facing tough, well-financed competition from, among others, Dish Network’s (NASDAQ:DISH) Sling TV and Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) YouTube TV. Both provide similar offerings to Fubo.
The Bottom Line on Fubo Stock
Fubo could continue adding tens of thousands of subscribers per quarter for the next year or two. Given the company’s extensive coverage of soccer, it could attract 1 million or so hard-core soccer fans. And since Fubo carries many foreign-language channels, another 1 million immigrants may join the service. Finally,, another 1 million or 2 million cord cutters who, for one reason or another, aren’t that cost-conscious could sign up for Fubo.
But on the whole, I don’t think the company currently has what it takes to beat Sling and YouTube TV, let alone take meaningful market share away from traditional Pay TV services.
Consequently, I think that Fubo stock, with its $2.35 billion market capitalization, is not a good buy for longer-term investors.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.