shares of FuboTV According to data from S&P Global Market Intelligence, it gained more than 20% this week (FUBO 1.71%). Shares were up more than 20% in after-hours trading after the live-TV streaming platform released its second-quarter earnings report after the market closed on August 4. On top of a resurgence of memes and growth stocks this week, which has sent Fubo shares into the stratosphere.
On August 4, Fubo released its second quarter earnings report. Revenue grew 70% annually over the period to $222 million, with customers in North America up 47% to 947k. Clearly, investors are excited about Fubo’s growth numbers, with the stock rising in post-report trading day.
Fubo also benefited from the wide volatility in the market this week. Even before its earnings announcement, shares were up as much as 19.5% since last Friday’s close. Why? It’s hard to pinpoint an exact reason, but it’s likely that Fubo stock is trading higher this week due to the resurgence of 2021 mem stocks. For example, GameStop, one of the most famous meme stocks of last year, is up 13.4% this week. While this may sound silly, post 2021, it shouldn’t be surprising that stocks can fluctuate wildly in such a short period of time.
But don’t get too excited about Fubo’s prospects. The company is losing money on account of all the licensing/royalty payments to compulsorily bring the cable bundle to Connected Television (CTV). Its net income margin is -52.4% and it lost $218 million in operating cash flow during the first six months of this year. There are only $373 million in cash and equivalents on the balance sheet right now. Fubo needs to reach profitability — and fast — or it will have to raise more money from investors, potentially at a discounted stock price.
Investors should stay away from Fubo stock because of how unprofitable the business is and the hypercompetition of the streaming video industry. However, its history of stock dilution should also scare you. Over the past three years, the outstanding shares have increased by 690%, drastically weakening any shareholder holding over that time frame.
As long as Fubo remains heavily unprofitable, it will have to continue to dilute shareholders through share offerings. Unless this changes, investors should avoid buying the stock.
Brett Schaefer does not hold a position in any of the stocks mentioned. Near The Motley Fool fuboTV, Inc. Has posts and is recommended. The Motley Fool has a disclosure policy.