Why Needham Is Bullish On FuboTV: Streaming Growth, Sports Betting Opportunities And More

Streaming television service fuboTV Inc. FUBO is a value play, according to a Needham analyst. 

The FuboTV Analyst: Laura Martin maintained a Buy rating on FuboTV stock with a $60 price target.  

The FuboTV Thesis: FuboTV is an inexpensive way for public investors to participate in the OTT streaming upside for the next one to three years, Martin said in a Monday note.

The stock also carries a free equity warrant on sports betting revenue upside in the next three to five years, the analyst said. 

Laying out the bull case for FuboTV, she said she likes the following about the OTT streaming provider:

FuboTV participates in the connected TV industry growth of 30%-100% per year, Martin said. CTV in U.S. homes will increase from 104 million in 2020 to 110 million by 2023, according to eMarketer estimates, giving FuboTV about 2 million homes per year in potential new subscribers, the analyst said.

COVID-19 accelerated FuboTV's growth by one to two years, she said. 

Related Link: FuboTV Reports 2020 Revenue Up 83%, Lays Out Sports Betting Launch Timeline

FuboTV is a beneficiary of the shift in advertiser preference toward CTV, as 100% of its revenue is from CTV ads, Martin said.

Given that gross margins on these ads are about 80%, the company is also likely to see margin expansion, the analyst said. 

"FUBO is a low-priced competitor to linear TV users that are interested in a specific sport, because FUBO does not tie users to annual contracts." 

FuboTV's viewership is about 70% men, and about 70% are between 18 and 34, according to Needham.

This is a valuable demographic target for advertisers, Martin said. 

The company's two revenue streams, advertising and subscriptions, lower Fubo's risk through business model diversification, the analyst said.

Wagering would add a third revenue stream, further lowering risk through diversification, according to Needham. 

FUBO Price Action: At last check, fuboTV shares were slipping 3.2% to $21.18. 

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Photo courtesy of FuboTV.