fuboTV's (NYSE: FUBO) stock has fallen off a cliff over the last year, as investors worry about its profitability in this rising-interest rate market. fuboTV didn't do itself any favors when advertising, its only source of high-margin revenue, underwhelmed in its first-quarter earnings report. The advertising underperformance has some investors wondering whether the results were only an aberration, or whether they foreshadow significant problems moving forward. Here are two things investors should watch to determine whether fuboTV's ad business sinks or soars.
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In its first-quarter earnings, fuboTV management blamed reduced TV ad spending from consumer product goods (CPG), finance, and technology companies for the poor results. Also, some experts believe reduced ad spending is a reaction to inflation and supply chain disruptions. As a result, fuboTV's advertising average revenue per user (ARPU) declined 4.5% year over year in the first quarter of 2022, hurting fuboTV's contribution margin, which the company uses to measure its progress toward profitability. As a result of fuboTV's profitability setback, the stock dropped over 20% the day after it released earnings .
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2 Reasons Investors Should Pay Attention To FuboTV's Advertising Business