By Sam Boughedda
fuboTV Inc (NYSE:FUBO) shares were downgraded to Neutral from Outperform by a Wedbush analyst on Wednesday.
The analyst, who raised the firm's price target on the stock to $6 from $5, said despite all of the company's bold targets relayed at its investor day, fuboTV needs to raise capital and cut cash burn rapidly, or it will be out of cash within a year.
"While we are confident that they can do both, it is uncertain how dilutive the capital raise will be and how rapidly their cash burn will improve. fuboTV has a solid head start in offering live sports programming to its subscribers, has a thriving and growing advertising business, and presents a compelling opportunity for a sports wagering company to partner with an established sports television broadcaster. However, slowing subscriber growth, fierce competition, inflation, and rising content costs all make us less confident over the near-term," said the analyst.
However, the analyst said the firm is raising revenue estimates to reflect slightly higher ad ARPU (with room for upside should fuboTV track toward its stated 2025 target) and raising its adjusted EBITDA estimates to reflect lower content acquisition costs in 2023 and 2024.
"With our modestly higher estimates, we are taking our price target to $6 from $5, reflecting an EV/sales multiple of 0.7x on our 2024 revenue estimate (from 0.6x prior). Our price target is based on a revenue multiple, so this is admittedly subjective, because we have no clear line of sight to FCF generation. fuboTV management did provide guidance for positive free cash flow in 2025, and because of that we have raised our valuation slightly. However, we see a lot of uncertainty imbedded in guidance and would like to see meaningful progress before becoming more constructive on shares after the recent run-up," concluded the analyst.