Weak Financials, Elevated Costs, and High Short Positioning Weighs on FuboTV
After jumping 10.47% on Monday, FuboTV (NYSE:FUBO) has lost almost 7% today. This drop comes days after dropping its lowest-end sports bundle. The leading sports streaming platform has had a rough start to the year, as shares plunged 57% year-to-date. Despite robust top-line growth, FUBO stock has a disappointing bottom line and high costs make it a no-buy.
FuboTV grew topline consistently over the past years and is now expected to surpass the $1 billion net sales threshold in 2022. Paid subscribers are also expanding fast. The streaming specialist closed in 2021 with 1.13 million customers, surging 106% from 2021. The monthly average revenue per user increased moderately, up 15.69% to $72.7. The recent rise of the FuboTV Pro Plan bundle by $5 to $69.99 per month should contribute to supporting this rapid top-line growth. Nevertheless, subscriber-related expenses soared 126% in 2021 to $593.2 million, representing an average cost per user of $65.62 per month.
With these elevated costs, FUBO’s net loss is expected to flatten at -$384 million in 2021. That said, the streaming specialist will soon require additional capital, amid a fragile cash position of only $49.2 million at the end of 2021. It is not a surprise that market participants hammered this growth stock. An inflationary market environment is not favorable for low capitalized and unprofitable businesses.
The recent signals sent by insiders and short positioning on FuboTV shares add to the bearishness of the stock. On March 29, FUBO’s Chief Growth Officer, who owned over 1.3 million shares, sold 161,454 shares of the company for a total of nearly $1.2 million. On the other hand, short interest moderately decreased in March 2022 to $225 million compared to $288 million in February. Yet, short interest as a percentage of float ballooned to 25.84% in March, indicating a pessimistic investor stance on FUBO.
Investors with a high-risk appetite might be tempted to buy FUBO on its weakness, but the bearish momentum is unlikely to stop anytime soon given the current inflationary context. Indeed, elevated short positioning, weak financials, and a possible stock dilution this year make FUBO stock a no-buy for now.
On the date of publication, Cristian Docan 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.
