Fubo Is Playing Relatively Safer Than Rival YouTubeTV; Its ARPU Is An Added Strength: Analyst

Needham analyst Laura Martin reiterates a Buy rating on FuboTV Inc FUBO with a price target of $3.00. The analyst summarized five things she likes most about FUBO as an investment idea for FY23.

FUBO has always marketed itself as a low-cost, sports-first cable replacement bundle. Martin believes FUBO's new rights to air will aid this brand promise of the Regional Sports Networks (RSN), which have ubiquitous local baseball and hockey games in 2023 and 2024.

Historically, FUBO's sports focus has been on national rights. Still, the RSNs add hundreds of local games, which Martin believes will attract new categories of subscribers, suggesting an upside to sub-add estimates during FY23.

FUBO has often exceeded its guidance as a public company than it has missed. Based on its 1Q23 guidance, revenue growth will be faster than the sub-growth. Since incremental ARPU has 80% margins, higher ARPUs should drive even quicker profit growth in FY23. 

Martin believes price increases for FUBO's core bundle, advertising rev growth, and up-selling new products such as multiple simultaneous viewing streams and premium services such as DVD cloud storage drive the ARPU growth.

FUBO's biggest vMVPD competitor, Alphabet Inc GOOG GOOGL YouTubeTV, which recently bought the rights to air NFL's Sunday Ticket (from DirecTV). Interestingly, FUBO subs can buy the NFL Sunday Ticket package separately without subscribing to YouTubeTV. Further, YouTubeTV is taking a big financial gamble on super fans of a single sport, the NFL, for about four months each year.

FUBO has 3-5 year deals with each broadcaster, which air most of the biggest games in every sport. The analyst believes that only one of these large contracts (not NBC) is up for renewal in the next nine months, minimizing negative gross margin surprises in FY23.

Asymmetrical data helps FUBO pay just enough for content that it knows it can make a profit on. FUBO has 1st party data about how many hours content is viewed, so it can pay just enough to maximize its revenues and profits.

Price Action: FUBO shares traded higher by 12.90% at $1.19 on the last check Friday.

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