On Friday, Needham, a notable investment firm, adjusted its outlook on fuboTV (NYSE: FUBO), a streaming platform specializing in live sports content. The firm lowered the price target to $2.00 from the previous $3.00 but maintained a Buy rating on the stock. The revision comes as Needham anticipates increased competition and higher costs affecting fuboTV's performance in the financial year 2025 (FY25).
The reasoning behind the price target adjustment is threefold. First, there is an expectation of a new competitor entering the market in the fourth quarter of 2024 (4Q24). ESPN, FOX Sports, and Warner Bros. Discovery/Turner Sports are reportedly collaborating to launch a sports-focused virtual multichannel video programming distributor (vMVPD) service. This service is similar to fuboTV's offering and is expected to intensify competition in the sector.
Secondly, Needham forecasts higher marketing expenses for fuboTV in FY25 due to the more competitive environment. The company is expected to ramp up its marketing efforts to maintain its market share, which could lead to increased spending.
Lastly, the investment firm cites higher cash costs related to a lawsuit that fuboTV has filed against the new ESPN vMVPD. Legal expenses are anticipated to weigh on the company's financials.
Despite these challenges, Needham retains its forecasts for FY24 but has revised its FY25 estimates downward, leading to the new 12-month price target of $2 per share. The firm's analyst emphasized the retention of the Buy rating, suggesting a continued positive outlook on fuboTV's stock despite the anticipated headwinds.
In other recent news, FuboTV (NYSE:FUBO) has reported a robust 24% year-over-year increase in total revenue, reaching $394 million, and an 18% rise in paid subscribers, now totaling 1,511,000. The company also improved its adjusted EBITDA margin to -10%. FuboTV has expanded its reach onto Comcast’s entertainment platforms, including Xfinity Flex (NASDAQ:FLEX), Xumo Stream Box, and Xumo TV, aiming to reach millions of Xfinity Internet households. This expansion is part of FuboTV's broader strategy to aggregate premium content through a single app.
In a strategic move, FuboTV's shareholders approved an expansion of its 2020 Equity Incentive Plan, increasing the share reserve by 20 million shares to a total of 71.1 million. This is seen as a strategy to align the interests of employees with those of shareholders through stock-based incentives.
In addition, FuboTV forecasted continued growth in North American and Rest of World subscribers, as well as revenue for Q2 and the full year of 2024. The company is also actively engaged in litigation against major media companies, alleging anti-competitive practices, and has introduced enhancements for sports streaming, such as interactive ads and AI-driven playlists. These are recent developments in FuboTV's operations.
InvestingPro Insights
In light of Needham's recent outlook adjustment for fuboTV, current metrics and insights from InvestingPro provide an additional layer of understanding to the company's financial position and market performance. As of the last twelve months leading into Q1 2024, fuboTV's market capitalization stands at $392.84 million, reflecting its size in the competitive streaming market. Despite a notable revenue growth of 32.59%, the company's gross profit margin remains low at 7.65%, which aligns with Needham's concerns about increased costs and competition.
InvestingPro Tips highlight several challenges for fuboTV, including its struggle with weak gross profit margins and the likelihood of not being profitable this year. Moreover, the stock has been volatile, with a significant decline of over 55% in the past six months. However, on a positive note, 4 analysts have revised their earnings upwards for the upcoming period, suggesting some optimism amidst the challenges.
For readers seeking a deeper analysis, InvestingPro offers additional tips that could provide further insights into fuboTV's financial health and market prospects. To access these tips and make informed investment decisions, visit https://www.investing.com/pro/FUBO and use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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