If You Dig Deeper, fuboTV Stock Isn’t as Overvalued as People Think

So, here we have a huge discrepancy. FUBO stock is valued 5.9 times greater (i.e., FUBO $6,552/subscribers vs. NFLX $1,119/membership) than NFLX stock. Or it could be as much as 7.27 times than NFLX stock at the higher market cap.

Adjusting for Growth Differentials

Perhaps we can account for the fact that fuboTV is growing its subscriber base much faster than Netflix. For example, Netflix’s Q3 membership count was up 23.3%, but fuboTV’s base was up 58%. And as I mentioned earlier, it appears the Q4 base will be up 72%.

Therefore over five years, Netflix’s base will be 2.85 times its base today, assuming 23.3% compound growth. But, using say a 65% growth rate over five years, fubuTV’s base will be 12.23 times today.

Therefore, Netflix’s $224.83 billion market value divided by 574.3 million members results in a forward price per member of $391.49. But fuboTV will have 6.665 million subscribers, so its $3.571 billion market value results in a value of $535.78 per member.

Now the value gap has narrowed considerably due to the huge growth differentials. Using the higher market cap results in a slightly higher value gap. But in general, it now looks that FUBO stock is only overvalued by about 36%.

However, I suspect that this value gap actually narrows to breakeven over about a 10-year outlook. Therefore, the growth difference makes up for the valuation per membership or subscription gap – depending on the future year time frame.

What to Do With FUBO Stock

I used a 65% growth rate for the next five years for FUBO stock. But, as pointed out, the company projects that its Q4 revenue might grow over 84%.

Moreover, the company is taking on new lines of revenue that Netflix does not have. This includes advertising (already on its books) and also sports betting. This gives it a more robust valuation spectrum than Netflix.

Therefore, taking all this into consideration, FUBO stock might not be seen by the market as too highly valued. However, we need to see some consistent growth patterns from the company and more clear information about its capital base.

Once these are clear, I suspect the market might revalue FUBO stock as a younger, more rounded version of Netflix.

On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Mark Hake runs the Total Yield Value Guide which you can review here.

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