FUBO upstaged by UPST

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FuboTV (FUBO) results were definitely overshadowed by UPST the last day. But they’re no slouch, either. Both companies gained ground in my portfolio (and I added to both today!).

  • UPST jumped from 6th to 3rd in my portfolio
  • FUBO jumped from 11th to 6th in my portfolio.

Since I retired the beginning of 2020, I have no new funds coming in so I sold out of my BAND position (was a 3% holding) and reduced my FLGT holding (from 7% to 5%) to give me 5% to add to FUBO and UPST.

The YoY revenue growth in FUBO is just fantastic, with accelerating acceleration.


Q3 2020:  71%
Q4 2020:  98%
Q1 2021: 135%
Q2 2021: 196%

Subscriber growth continues to be fantastic, ARPU is growing well, and advertising revenue is gaining quickest of all (up 281%, but off a small base). Their biggest knock has always been profitability, but that is moving in the right direction, too. And I’m not too concerned about that at this time, as I feel it will be taken care of from their continued monetization through their increased advertising revenue, and the upcoming sportsbook.

Which brings up another similarity between these 2 companies:

  • UPST is doing as well as they are with no current contribution from auto loans, which when they kick in should really jumpstart growth.
  • FUBO is doing as well as they are with no current contribution from sports betting (and minimal from advertising), which should also jumpstart their growth (and profitability).

In my portfolio, I believe these 2 companies have the most potential for gains currently. FUBO carries more risk than UPST in that it will be a while till they can show profitability, and the sportsbook has not been released yet, but could be huge from the preview released recently.

https://www.youtube.com/watch?v=y_1kX9PoluI&ab_channel=f…

GLTA holding both these companies!

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Hi foodles,

I’m right there with you! I’ve been waiting for Fubo’s stock price to catch up with the company’s performance. Looks like that might be finally be starting!

I only (sadly) have very small positions in both UPST and FUBO, 6.6% and 2.5% respectively. I got into UPST a little late, and FUBO I’ve been waiting for another quarter before making it a larger position. Both will certainly become increased positions from here however!

I still can’t believe UPST’s results!

FUBO, on the other hand, is part of my “advertising tri-fecta” along with TTD and MGNI. TTD and MGNI are the two largest digital ad brokers in the CTV space, and are each opposite sides of the same coin, with TTD on the buy-side and MGNI on the sell-side. They each partner with each other, and with FUBO. I expect over time, these three to all do incredibly well together based on the numbers we’ve been seeing recently!

–
Paul

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I struggle with FUBO. Although the growth is there, the losses just seem endless. In the Q2 investor presentation, they have a slide which shows expenses as a percentage of revenue. In 2Q19 it was 257.6%, in 2Q20 it was 252.3%, in 2Q21 it was 155.3%. 155% of revenue !!! And a huge improvement from historical!

Compare and contrast with UPST or other companies, which are positive EPS (GAAP or non-GAAP depending on the company).

Another worry, in a bidding war for high value sports contracts, can FUBO really compete with other streaming kings (AAPL, NFLX, ROKU, HBO, Disney)? They can lose money on the contract and consider this a loss leader. I fear FUBO thinks they can do that too? Again, more bottom line pressure.

My worry is can they ever become profitable? It is enough of a worry for me that FUBO doesn’t have a slot in my portfolio.

Thanks,
Rob

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Hi Rob,

I totally get where you’re coming from. The same was said about NFLX back when they first got into streaming. At first everyone was concerned the “content owners” would just keep raising prices and make it impossible for Netflix to acquire decent programming at reasonable prices. Then it was the “giants” would build their own platforms and crush them. Here we are more than a decade later, and neither of those worries ever came true. The “content owners” decided to restrict their content somewhat, so Netflix began creating their own. Then the giants decided to finally build their own platforms and attempt to compete. DIS is really the only other streaming platform that comes close to NFLX’s scale at this point, and yet we’re seeing that no one is interested in dropping NFLX, rather, they’re adding the other services and keeping NFLX.

I see the same happening for FUBO. They are the only real streaming service that focuses on sports. And they provide something like 200 different channels for non-sports programming. None of the other major streaming services focuses on live sports. It’s an after-thought, at best. For NFLX, it’s non-existent. The thing I like about Fubo is that I just don’t see much competition with them from anywhere. Fubo carries more local-market sports programming than anyone else. They’re becoming the go-to service for all thing sports.

Of the “giants” you mention (AAPL, NFLX, ROKU, HBO, Disney), I don’t see any of them ever trying to compete in this area.

AAPL has been playing with the idea of a streaming service for over a decade. Everyone was convinced that AAPL would kill NFLX. We’re still waiting for that to happen.

AMZN (even though you didn’t mention them) is the same story as AAPL, except they’re serious about streaming, just not as big or appealing as NFLX.

ROKU is only now getting into original content. They make their money off the devices, partnerships, and advertising. They’re not overly interested in focusing on sports, it’s too narrow of a niche, and too expensive for the return for them.

NFLX same story as ROKU with respect to cost/benefit of carrying sports.

HBO - They’ve been doing original content for 40+ years. And during all that time, the only thing they’ve done with sports has been the occasional PPV special, usually boxing or WWF events.

DIS - possibly the only one who might show an interest, given their ownership of ESPN. But DIS is a huge conglomerate. No one revenue stream moves their needle overly much. They lack the focus to bother with sports to the level it would be worth their while. This is observable in how they treat ESPN, which has been losing viewers for a long time now.

The other thing about FUBO is that they’re not focused on the U.S. They’re focus on sports is world-wide. And they’re being super smart about this. Look how much Amazon just paid for the exclusive rights to Thursday Night Football ?! $1B/year for 11 years! How big is the audience for Thursday night football? Sure, it’s huge. But it’s pretty much limited to the total number of people who care about American football. There are 18 regular season weeks and 3 pre-seasons weeks. Assuming every week has a Thursday game, that’s 21 games, at a cost of over $47.6M/game. The Super Bowl brings in ~150M viewers. Most of which probably do NOT tune into Thursday night games!

Fubo, on the other hand, has the exclusive rights to the 2020 Qatar World Cup qualifying soccer matches of the South American Football Confederation for the 2022 world cup. The deal includes 70 qualifying matches that are set to begin in June and extend into early 2022. The World Cup brings in more the 4x the viewership of the Super Bowl at over 500M viewers. Even if the South American qualifying matches (70 of them!) each bring in only 1% of the World Cup viewership, that’s 50K people per game, or over 350M viewers over 70 games. The terms of this deal have not been disclosed. But I doubt it was at a cost of $47M/game!

I’ll gladly take the bet on Fubo over any of the giants competing with them for live sports at this point. Which brings up another point. Fubo has developed an exclusive on-line, fully integrated sports betting platform that allows you to place bets while the game is streaming live! Fully integrated between your phone and your TV. No one else has that!

So, generally, their lack of profitability now doesn’t bother me much since most of my companies aren’t profitable anyway and won’t be. They’re investing in fast growth and first-mover-takes-most strategies. There are certainly things to watch out for, but worrying about what the giants might do, or that they’re not profitable (yet) aren’t those things.

Here are some great articles written up on Fubo that address your concerns from different angles:

The second one is by Starrob, and the last one by Beth Kindig who’s been interviewed by TMF a couple times. And you really should check out their earnings report in detail. They killed it this past quarter and project to do it again next quarter!

–
Paul

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Hi Flix,

I am not sure I really get the argument on FUBO having streaming rights to World Cup soccer/etc. being better vs. NFL games here due to number of potential viewers. Generally speaking the people watching NFL games in the United States have a lot more disposable income than say most of the rest of the world. So even if the absolute numbers of people watching soccer is a lot larger… I would think the NFL games are still a lot more valuable in the advertisers viewpoint, and they would be willing to pay more $$ to get their product in front of them.

I agree that there is a very real risk that FUBO’s current business model doesn’t work. It might change when they start getting the sports betting monetized, but it looks like too much of a gamble at this time.

Bnh

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Hi Paul,

I hold $fubo too but I’m not sure I share the same thoughts on the above.

You quoted 500m watch the World Cup, but that is the total worldwide audience. Fubo is used only in the US, so the potential base of customers who may be interested in watching the South American qualifying matches is tiny, remember qualifying games are VERY different to the actual World Cup, which is being held in Qatar in Nov/Dec 2022.

For me, if Fubo is going to see even a smidge of the netflix growth trajectory, they need to build up enough revenue and cash from their sports betting to then start to acquire NFL and exclusive rights to the major US sports, otherwise it’s going to be a hard road.

However, I do feel there is enough of an audience in the US that are Fubo potential customers who like Soccer particularly but also are all round sports enthusiasts, especially the millennium generation who will love the mobile first experience and the fun betting that will be served up, to allow Fubo to grow substantially from here. The key though is the sports betting product and revenue, so its a high risk play until that starts proving itself.

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For me one of the biggest take from earnings was 50% gross margin long-term target of the business. Gandler mentioned it several times and considering hyper-growth in ads and subs as well as good progress in gambling business the team is moving the boat in a right direction.

I have small position in FUBO (4%) and liked the results. In this case the numbers look good as opposed to for example Fiverr which I exited after ER. Fubo does not have to be the next Netflix, it has to continue to do well in operating metrics each quarter and the share price will follow. Will continue to hold and add on weakness.

Best,
V

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Hi Andrew,

You quoted 500m watch the World Cup, but that is the total worldwide audience. Fubo is used only in the US, so the potential base of customers who may be interested in watching the South American qualifying matches is tiny, remember qualifying games are VERY different to the actual World Cup, which is being held in Qatar in Nov/Dec 2022.

Good points! I get that the qualifiers are very different. Which is why I used 1% of the World Cup world-wide viewership number as a super conservative number. I suppose it could .05% or maybe even less. I have no idea. It was a total guess that seemed reasonable late last night when I typed it out :slight_smile:

I guess I’m optimistic because I don’t see any other live streaming options that provide as much access to as many different sporting events as they do. There is no one, central place to get all live sports. There probably never will be. But Fubo currently offers more than anyone else. And to me that sounds like a very attractive proposition to those who need their sports (I’m not one them :slight_smile:

The other aspect I think will be a huge money maker for them is the live betting. Who knows, it could totally fail. DraftKings could crush them. But better minds than mine, like Beth Kindig, don’t think so.

Just to be clear too, I’m not overly or exuberantly optimistic. FUBO occupies 2% of my portfolio. It’s a complete starter position just to keep an eye on things. I do not at all see the future for them that I saw for Netflix back in 2008. To me, where Netflix is now, was crystal clear even back then. Fubo has no where near as clear a future trajectory to me. But, I’m optimistic enough to watch it with 2% of my portfolio.

–
Paul

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FUBO, like YouTubeTV, raised its prices to nearly $70 a month recently.
Neither of them carry my regional sports network (NESN), but there’s no discount for the omission. YouTube was literally, “yeah? deal with it”.

I went back to (gasp!) Comcast because of Triple Play / returning customer including, yep, NESN (regional sports) for a 2 year contract, for @$100 less than double play + either YouTube or FUBO.

For many people that monthly bill is what it’s all about.

The more YTV and FUBO act like cable companies with forced packages, the worse off they will be. I liked YTV. Of course the problem is 99% of people would drop 90% of the sh*t channels they all package up if they went pure a-la-carte.

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FlyingCircus,

What you point out is the eternal problem of TV. Whether it’s cable or streaming, or even back in the old days of only 3 networks, no one entity has all the programming to satisfy all of the people. I cut the cord entirely because I don’t ever watch live TV. I haven’t since 2008-ish when Netflix launched streaming. I’m one of those few people who doesn’t watch sports except maybe the Super Bowl and occasional hockey or soccer game. But, because no one place has everything I (or my family) want to watch, I now subscribe to 5 different streaming services, and yet, my monthly “television bill” is still cheaper than Comcast or Verizon.

NESN is very local to New England. Fubo isn’t going to cover that, or any other regional market 100%. But the bet is, they have enough of the many different local markets plus enough national coverage to make it more attractive to a lot of people. It seems to be working for them. I personally wouldn’t sign up for either Fubo or YouTubeTV just becauseI don’t care about live TV. I get enough local stuff if I need it with my HDTV antenna.

But all of this is completely irrelevant from an investing perspective. I fully recognize that I am NOT Fubo’s target audience. From an investing perspective, all I care about are their numbers. And their earnings reports keep demonstrating very good trends in their numbers. My goal is to make money off of Fubo who’s goal is to make money off of those who can’t live without their sports and live TV. When that stops working for me, I’ll move on. But that seems to be a long ways off :slight_smile:

–
Paul

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FlyingCircus and Paul,

Just FYI that Fubo DOES carry NESN and NBC Sports Boston in the New England area. YouTubeTV does not.

Regards,
Rockleppard

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I agree with many of the points here. I think Fubo is one if the beneficiaries (and can be a big one) of the few trends:

  1. Cord cutting, as viewers shift away from linear TV to streaming;
  2. mix-shift of advertising dollars from linear TV to CTv;
  3. and online sports betting, which I think is pretty cool that they are getting into.
    I have been trying to follow Fubo since Q1 and their Q2 did put out impressive figures to build a small position. Even market loved their results.

However, I see today they dipped 10% over a news where they are entering into a “at the market common sales agreement”. Can anyone explain how this works and how this benefits to management/company? Is it to raise more capital for business or more like insider selling?
Thanks

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It’s a secondary offering. Considering around 140m outstanding shares currently, roughly 140x30=4.2b market cap. They want to raise up to 500m, so it’s around 12% dilution. Pretty significant but, firstly, shows investors’ appetite to invest into this business and, secondly, they need funds to continue growing. As long as they deliver significant growth, I’m onboard.

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Hi all,

Great discussion. I’m long Fubo for many reasons already mentioned, plus for the fact that they have first party data. This is a differentiator.

At first this will be used for the sportsbook, but the applications are many.

For example:

  1. If I’m a fan watching a LA Lakers, Fubo knows this, in addition to betting, why can’t they offer me to buy (with a push of a button) the LeBron James’ sneakers I (or my children) just saw him wear in the game? Surely they can partner with retail or other e-commerce companies for this. They would then know your shoes & apparel preferences to further personalize the experience.

  2. If I’m a fan watching a game or using the sportsbook, more often than not I may also want to get something to eat or drink. Why can’t Fubo partner with the likes of DoorDash and get me my favorite items delivered at the start of the game or at half time?

In terms of the scope of the audience don’t count out US Spanish speakers (likely Soccer fans) and folks from Asia or Southeast Asia (likely Cricket fans).

Also, majority subscribers are males / 85k annual income. At this income level I don’t think subscription costs are a concern.

For me, it’s all about execution now.

Regards,
Latigo

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