Why FuboTV Stock Soared This Week
Shares of Fubo TV (FUBO 1.71%) jumped more than 20% this week, according to data from S&P Global Market Intelligence. The live TV streaming platform released its second-quarter earnings report after the market closed on August 4, sending shares up more than 20% in after-hours trading. Along with a resurgence in meme and growth stocks this week, this has sent Fubo’s stocks into the stratosphere.
On August 4, Fubo released its second quarter earnings report. Revenue grew 70% year-over-year to $222 million during the period, with subscribers in North America up 47% to 947,000. Clearly, investors are excited about the growth numbers Fubo is posting, with the stock soaring after hours trading on the day of the report.
Fubo also benefited from broad market moves this week. Even before its earnings announcement, shares had risen 19.5% since last Friday’s close. Why? It’s hard to pinpoint an exact reason, but it’s likely that Fubo stock is trading higher due to a resurgence in 2021 stocks this week. For instance, stoppage of play, one of the most famous meme stocks of the last year, rose 13.4% this week. While it may sound silly, after 2021 it should come as no surprise that stocks can fluctuate wildly in such a short time.
But don’t get too excited about Fubo’s prospects. The company is hemorrhaging money from all the license/royalty payments it has to make to essentially bring the cable bundle to connected television (CTV). It has a -52.4% net profit margin and burned $218 million in operating cash flow in the first six months of this year. The balance sheet currently has only $373 million in cash and cash equivalents. Fubo must achieve profitability – and quickly – or it will have to raise more money from investors, potentially at a reduced price.
Investors should stay away from Fubo shares due to the company’s profitability and the hyper-competitiveness of the streaming video industry. However, his history of stock dilution should also scare you. Over the past three years, outstanding shares have increased by 690%, greatly diluting all shareholders who have held during this period.
As long as Fubo remains highly unprofitable, it will have to continue to dilute shareholders through stock offerings. Unless that changes, investors should avoid buying stocks.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool fills positions and recommends fuboTV, Inc. The Motley Fool has a Disclosure Policy.