Fubotv Inc. (NYSE: FUBO)
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BUY: Current Price: Target Price: Upside: FUBO $35.30 $60 70% FuboTV Inc. (NYSE: FUBO) Communication Services Sector Sector Head: Zachary Halperin Senior Analyst: Katelyn Cecere, Adrian Erazo, Jamie Geen, Vincent Huang Junior Analysts: Adam Kawalek, Janet Liu Holdings Overview Weight Earnings Update Outlook • Beat revenue expectations by 13% • Increased its expectations for the combined annual • Beat EPS expectations by 26% earnings to now $7.7 billion and earnings of $2.61 • Had 390 million monthly active users per share 10.60% • Will be launching multiple games in Q4 to keep the momentum from the holiday season ECTOR going S • Alphabet earned $23.30 per share versus the • Alphabet is continuing to provide funds for predicted $15.90 per share for the fourth quarter COVID relief and small businesses of 2020 • Alphabet is looking into additional projects with 33.76% • YouTube showed a 47% increase in advertising artificial intelligence to develop advanced OMMUNICATIONS OMMUNICATIONS earnings from direct-response ads health care | C UND F • Disney is still undergoing its restructuring • Expected to continue to beat subscriber process expectations 13.09% • Currently in negotiations with NFL to determine • Revenue expectations have increased amidst raise in price for Monday Night Football increasing distribution of vaccine licensing costs • Expected continuing emphasis on DTC revenue NVESTMENT I • Beat subscriber expectations in Q4 earnings segments LNGHAMTON B 2 Holdings Overview Weight Earnings Update Outlook • Delivered $37 million which is equivalent to $.18 • During the pandemic Equinix was able to per share expand its data centers greatly 8.98% • Net income on revenue was $6 billion which • Looking to expand into other countries after represents an 8% increase from last year expansion into India and Canada were successful ECTOR S • Beat revenue by 7% • Launched Quest 2 and is on track to become the • 31% YoY ad revenue growth first mainstream VR headset 12.49% • Focusing on privacy and security • Expected slight to no growth in ad revenue due • Currently considering Apple one of its main to competition with Apple in Q1-Q3 competitors as iOs14 will hinder ad growth OMMUNICATIONS OMMUNICATIONS • Beat revenue expectations by 7.6% • The expected revenue for fiscal year 2021 | C • Beat EPS expectations by 22.4% will range between $3.235 to $3.285 billion • UND 11.50% • Placing a huge emphasis on mobile gaming CEO Strauss Zelnick mentioned the intent F • Q3 earnings decreased year-over-year of releasing games at a quicker pace • Q4 net income of $4.7 billion, down 9.6% YoY • Spent $45 billion on acquiring 5G mid-band NVESTMENT • Verizon Media revenue was $2.3 billion for Q4, spectrum assets I 9.58% up 11.4% YoY • Aggressively building out their 5G network, • Full year adjusted EPS of $4.90, compared with projected CAPEX of $18.5 billion 2019 adjusted EPS of $4.81 • Focused on a network-as-a-service strategy for • Projected overall revenue growth of 2%, long term growth including wireless service revenue growth at 3% LNGHAMTON for FY ‘21. B 3 Sector Outlook and Strategy Sector Overview Return Communication BIF Communication Cord Cutting Streaming Services S&P fund Services Sector 17.86% 27.63% ECTOR S New Consoles 5G 977 Basis Point Difference OMMUNICATIONS OMMUNICATIONS 2021 Strategy Allocation | C ATVI VZ VZ UND ATVI 10% F 11% 10% 11% EQIX • Move away from legacy holdings that have run up and may EQIX 9% 9% GOOG GOOG face regulatory issues 20% 20% • Move into small cap companies to increase the volatility and TTWO NVESTMENT I 11% returns in our sector TTWO 11% DIS GOOGL DIS 13% 14% 13% FUBO FB FB 14% LNGHAMTON 12% 12% B 4 Executive Summary Investment Thesis & Key Statistics Overview BUY: FUBO FuboTV, Inc. is a leading digital entertainment company, combining Fubo’s direct-to-consumer live TV streaming Current Price: Target Price: Upside: platform with FaceBank’s technology-driven IP in sports, $35.30 $60 70% movies and live performances ECTOR S $60 52 Wk Range: $5.00 - $62.29 Market Cap: $2.36 Bn Offers large package and utilizes their proprietary data and 1 Yr Fwd Rev: 5.35x EV: $2.81 Bn technology to optimize their platform for live TV and sports Beta: 1.16 CEO: David Gandler viewership OMMUNICATIONS OMMUNICATIONS Historical Performance Basis for Growth | C 600% UND F 500% 400% Cord-cutting Partnership Legalization of 300% will drive an deals allowing online sports NVESTMENT 200% increase in for increased betting will I subscriber exposure to drive long-term 100% growth consumers growth 0% -100% 1/1/21 1/8/21 2/5/21 10/9/20 11/6/20 12/4/20 1/15/21 1/22/21 1/29/21 2/12/21 2/19/21 2/26/21 LNGHAMTON 12/25/20 10/16/20 10/23/20 10/30/20 11/13/20 11/20/20 11/27/20 12/11/20 12/18/20 B 5 Company Overview FuboTV is a direct-to-consumer live TV streaming service focusing on its live sports offerings Business Segment Revenues Cost Structure Broadcasting and Transmition 5% Sales and ECTOR Subscriber Marketing S ~23.7% CAGR ~87.5% of Rev. 10% Technology and Development… Subscriber Related Expenses Advertising 69% 2020 General and ~54.6% CAGR Administrative OMMUNICATIONS OMMUNICATIONS ~12.5% of Rev. 2021 4% 2022 Depreciation and | C Amortization 2023 3% Market Penetration Margin Analysis UND F 3% 10% 60% 40% Hulu 20% 0% Youtube NVESTMENT -20% I Sling -40% AT&T TV Now -60% Philo -80% -100% Fubo 2020 2021E 2022E 2023E 2024E 2025E LNGHAMTON Contribution Margin Gross Margin B 2018 2025 6 EBIT Margin EBITDA Margin Industry Overview New Entrants Philo YouTube TV Hulu + Live TV ECTOR S AT&T TV Now FuboTV 2015 2016 2017 2018 2019 2020 2021 OMMUNICATIONS OMMUNICATIONS Subscriber Distribution Comparison Industry Trends | C 3% 4% 5% $65/month 5% UND 6% 8% F 14% 8% 100+ live channels 25% Cord Cutting 19% 24% $65/month 24% 21% 26% 85+ live channels 19% 5G NVESTMENT I $65/month 31% 34% 24% 65+ channels and streaming library 2018 2019 2020 $70/month Consolidation Hulu + Live TV YouTube TV Sling TV 65+ live channels LNGHAMTON AT&T TV Now Philo Fubo TV B 7 Investment Thesis Growing Partnerships ECTOR S FuboTV is partnering By entering the online with companies that As consumers cut the sports gambling space, interact heavily with cord at an increasing fuboTV is positioned as everyday consumers rate, subscriber count the only platform with and advertising revenue which will increase OMMUNICATIONS OMMUNICATIONS integrated viewing and awareness and will grow significantly wagering | C conversion rates UND Subscriber & Ad Legalized Sports F Growth Gambling NVESTMENT I LNGHAMTON B 8 Cord Cutting Covid-19 Cord Cutting Trend Opportunity for Fubo 2% 7% 9% 9% 12% 17% 18% 19% Stream only U.S households 100% • The Pandemic 90% accelerated vMPVD (Cord Cutting) 80% 70% bundle subscriptions and 60% drove more people to 33 Million 50% ECTOR 40% S streaming • Streaming hours viewed up 30% Stay at home orders 20% pushed more people to 10% try out streaming and 200% y/y 0% Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 deepened penetration AT&T TV Now Philo Sling TV Hulu + Live TV YouTube TV Fubo TV OMMUNICATIONS OMMUNICATIONS Average Time Spent Watching TV US Pay TV vs Non-Pay TV Households | C 120 3:42 3:27 3:34 97.7 UND 100 94.3 F 90.3 84 77.6 73.7 80 70.2 66.8 63.4 60 68.2 64.4 60.4 NVESTMENT 56.3 I 40 51.7 44.6 # of of # Households (Mn) 37.3 32 20 28.1 3.2% -5.4% -6.7% 0 LNGHAMTON 2018 2019 2020 2016 2017 2018 2019 2020 2021 2022 2023 2024 B Hours % change 9 Pay TV households Non-pay TV households Advertising Opportunity Ad spending shift from to TV streaming Ad revenue growth will be a key value driver Total spending on Linear • Total spending on linear TV ads Advertising revenue has about an 80% margin TV ads dropped in 2020, a trend expected to -15.8% continue as cord cutting Subscriber revenue has about an -17% margin ECTOR S accelerates Households that no longer • Advertising dollars are subscribe to linear TV shifting towards Growth in advertising will be key to Fubo success because it Connected TV’s 33 Million has stellar margins that can propel Fubo shares higher OMMUNICATIONS OMMUNICATIONS CTV Ad Spending Growth Ad revenue will catch up to viewership | C $20,000,000 UND 2019 2020 Verdict F $15,000,000 % of TV 18% 18% Unch viewership $10,000,000 NVESTMENT I $5,000,000 % of ad +180% spend 5% 14% $- LNGHAMTON B 2019 2020 2021 2022 2023 2024 10 Interest and Recognition Increasing Hisense TV Viasat/jetBlue • Hisence recently announced that Fubo would be its preferred sports partner for its • Fubo partned with Viasat in early 2020 to provide all ECTOR S all new VIDAA TVs aircrafts with Viasat tech, Fubo using open caching • This will place a Fubo standards for the first time ever in aviation button on all Hisence VIDAA TVs which are exclusively sold at OMMUNICATIONS OMMUNICATIONS Wal Mart | C • jetBlue became the first aviation company to take • Fubo did not have to advantage of the Viasat-Fubo partnership by offering UND pay for this F FuboTV in flight which will give Fubo great exposure Recent Minority Stakeholders NVESTMENT I 8.8% 9.3% 17% LNGHAMTON B 11 Legalized Online Sports Gambling Gambling Legalization in the U.S.