Why FuboTV Plunged Today, Even On A Recovery Day For The Markets

Shares of sports-oriented streaming company FuboTV (FUBO 8.03%) sank on Monday, falling 10.6% at one point, before recovering to a 3.6% decline as of 2:42 p.m. EDT.

FuboTV announced a 1-for-12 reverse stock split, which will be executed at the end of today,and was previously announced on Fubo’s February earnings call. A reverse split is usually executed to keep the per-share price above a certain level, so as not to violate stock exchange rules. It also is intended to open the stock to a larger pool of investors, since many funds cannot buy shares of stock below a certain price level. Thus, reverse splits are usually greeted as a negative milestone for a company.

But could FuboTV’s shares now be a deep value?

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NYSE: FUBO

FuboTV

Today’s Change

(-8.03%) $-1.06

Current Price

$12.14

Key Data Points

Market Cap

$4.7B

Day’s Range

$11.96 - $14.21

52wk Range

$11.96 - $56.64

Volume

2.5M

Avg Vol

1.2M

Gross Margin

15.82%

Fubo is the streaming “stub” of Hulu+ Live TV

Back in October, Disney (DIS 0.92%) and FuboTV reached an agreement under which FuboTV merged its sports-centered streaming business with Disney’s Hulu+ Live TV streaming service. As a result, Disney now owns 70% of the combined entity, while FuboTV shareholders own the remaining 30%.

The combined entity actually reported decent numbers back in February, with pro forma revenue up 6%, beating analyst expectations, and the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin increasing from 1.4% to 2.5%.

Still, having a 30% “stub” of a streaming service doesn’t yield much value these days. And while year-over-year revenue grew, this was likely driven by price increases, as North American subscribers fell from 6.3 million to 6.2 million and international subscribers fell from 362,000 to 335,000.

Image source: Getty Images.

Could FuboTV actually be a value?

After a big decline over the past several months, FuboTV’s market cap has fallen to a mere $360 million. That actually looks fairly cheap, given that the combined company generated $6.2 billion in pro forma revenue and $78 million of adjusted EBITDA over the past 12 months.

30% of those revenue and adjusted EBITDA figures would come to $1.86 billion and $23.4 million, respectively, which would mean Fubo is trading at roughly 15.4 times EBITDA and just 0.2 times sales.

At that low a price-to-sales ratio, even mild improvements in EBITDA margins could make a big difference. So, Fubo could therefore be a deep-value pick here, suitable for higher-risk investors; however, the question is whether the modern-day consumer will continue to pay up for streaming sports content, which is already a pricey endeavor. According to TMF Research, customers are cutting back on streaming services amid confusion, competition, and skyrocketing bills – with live sports content being one of the bigger casualties.