Summary
- fuboTV Inc. guidance leaves much to be desired.
- One bright spot from fuboTV's Q4 results is that Q4 free cash flow usage dropped to $20 million. It was the best cash flow usage as a publicly-traded company.
- On balance, fuboTV Inc. stock looks quite risky.
Investment Thesis
fuboTV Inc. ( FUBO ) announced guidance that investors didn't welcome, with the stock falling at the open. The one positive element from this Q4 earnings report is that its free cash flow usage meaningfully improved compared with the same period a year ago.
That being said, I am forced to question whether fuboTV has enough cash on its balance sheet to survive the next 2 years until it reaches positive free cash flow.
FUBO, A Shell of Its Former Self
Looking back, it's difficult to imagine that fuboTV stock was once swapping hands at more than $50 per share. And sadly, at the time, I was so bullish on this name. Subsequently, the stock proceeded to fall 70% to around $15, and it looked like a bargain.
Today, with the benefit of hindsight, and with the stock down more than 90% from its all-time highs, and it's a very different story.
The question that investors have to answer is not whether fuboTV will thrive. But, whether it will survive.
Growth Narrative, Becomes Ex-Growth
The problem with fuboTV has never been about a lack of revenue growth rates. In fact, its guidance for the year ahead still points to +20% CAGR.
That being said, the problem here is that analysts following FUBO expected to see higher CAGR rates, with around 29% revenue growth rates expected for 2023.
SA Premium
Consequently, this brings us back to the key question. The only reason why investors got involved with this disruptive sports streaming company, is that investors were chasing growth. And if FUBO's growth rates are now substantially decelerating, what should investors cling to?
Path to Profitability, 2025
fuboTV notes that by 2025, the business will be free cash flow positive. So, what investors are left with right now is a business that's burning through cash flows.
On the other hand, on a positive note, Q4 marked fuboTV's "lowest level of quarterly cash usage." By my calculations, Q4's cash flows from operations were approximately negative $20 million.
That being said, this figure includes several working capital adjustments for which I struggle to discern what's a one-off cash usage and what's a recurring figure. Nonetheless, we can clearly see that fuboTV's cash burn is slowing down.
Furthermore, keep in mind that in Q4 of last year, fuboTV burnt $50 million of free cash flow, thereby once more reinforcing that fuboTV is moving its cash flow burn in the right direction.
Will fuboTV Run Out of Time?
On a free cash flow basis, fuboTV burnt through $320 million in 2022. Even if fuboTV dramatically improves its cash burn profile, it's difficult to imagine a scenario where its full-year cash burn will be less than $200 million.
Given that fuboTV Inc.'s balance sheet only has approximately $345 million worth of cash and equivalents, that means that in the best-case scenario, fuboTV has 2 years left of cash on its balance sheet.
The other concern facing investors is not that fuboTV has not got a lot of cash on its balance sheet, or that its revenue growth rates are slowing down, or even that its cash burn doesn't abate, but that fuboTV continues to increase its total number of shares outstanding.
As a point of reference, in the past 12 months, fuboTV's total number of shares outstanding has increased by 34%. In fact, in Q4 alone, fuboTV's capital raise from diluting shareholders brought in nearly $65 million.
Today, with fuboTV Inc.'s share price hovering at close to an all-time low, I believe that this way of bringing capital onto its balance sheet may now start to close. And given the current higher interest rate environment, I suspect that future capital raises will minimally request more than 10% rates on their cash. Something that fuboTV Inc. will struggle to service in its present state.
For further details see:
fuboTV Earnings: Running With A Live Match