3 Reasons to Sell FUBO and 1 Stock to Buy Instead

fuboTV has been on fire lately. In the past six months alone, the company’s stock price has rocketed 161%, reaching $3.76 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is there a buying opportunity in fuboTV, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free .

We’re happy investors have made money, but we're sitting this one out for now. Here are three reasons why there are better opportunities than FUBO and a stock we'd rather own.

Why Is fuboTV Not Exciting?

Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) is a video streaming service specializing in live sports, news, and entertainment content.

1. Operating Losses Sound the Alarms

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

fuboTV’s operating margin has risen over the last 12 months, but it still averaged negative 18.9% over the last two years. This is due to its large expense base and inefficient cost structure.

2. Cash Burn Ignites Concerns

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While fuboTV’s free cash flow broke even this quarter, the broader story hasn’t been so clean. Over the last two years, fuboTV’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 11%, meaning it lit $11.05 of cash on fire for every $100 in revenue.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

fuboTV burned through $109.7 million of cash over the last year, and its $380.2 million of debt exceeds the $146.2 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the fuboTV’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.