Stock Market

I was racking my brain for a subject to write about regarding FuboTV (NYSE:FUBO) and FUBO stock when it occurred to me that the company’s May 31 announcement of three executive appointments was a big deal.

How so, you ask?

Well, if you read InvestorPlace contributor Dana Blankenhorn’s recent piece about losing money betting on FuboTV, you would conclude that the situation at the sports-oriented streaming platform was hopelessly doomed.

Dana may well be right. However, the fact that CEO David Gandler is still going after top talent suggests some fight is left in this dog.

Therefore, I believe that a bet by aggressive investors under $3 per share for FUBO stock is an excellent risk/reward proposition. And the latest hirings are confirmation. Here’s why.

FUBO Stock and Talent Acquisition

If you read the announcement, you will see that one of the moves by Fubo is an internal hire to make way for external hire.

Senior Vice President of Content Strategy and Acquisition, Ben Grad, is moving into the newly created role of Senior Vice President, Head of Strategic Partnerships and Operations. In turn, Grad’s part will be to grow the company’s revenue streams through external partnerships, including those related to its sportsbook.

With this, Todd Mathers — a veteran in the media industry with decades of content acquisition, programming, and strategy experience behind him — is slipping into Grad’s role. Mathers’s role is to add value for FuboTV subscribers by growing its programming while ensuring its licensing costs don’t get out of hand.

Lastly, Andrew Steinberg’s been hired as Vice President of Business Development. He’s responsible for growing FuboTV’s business opportunities with its platform partners such as Roku (NASDAQ:ROKU), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and several others.

In turn, Gandler’s comments about all three men indicate their roles’ importance to FuboTV’s future success:

“Ben’s understanding of FuboTV’s business, combined with his expertise and track record as a media executive, will be invaluable as we transition from a start-up to a growth-oriented media and technology company,” said Gandler. “We look forward to the impact Ben can have in this broader strategic role as FuboTV targets profitability in 2025.”

Profitability By 2025

As Blankenhorn noted, FuboTV could sustain three more quarters of heavy losses before running out of cash. Therefore, he sees FuboTV selling itself to a strategic buyer that can take its platform to the next level. For example, firms like Disney (NYSE:DIS) or Caesars Entertainment (NASDAQ:CZR) would be good options.

If my colleague bought in the $30s, or even the $20s, I could understand why he views the situation as hopeless. He’s sitting on a significant capital loss.

However, let’s consider its financial position for a moment.

It finished the first quarter of 2022 with $456 million in cash, cash equivalents and restricted cash on its balance sheet. Furthermore, approximately 45% of that is from its At-the-Market program. As Gandler wrote in its Q1 2022 shareholder letter, its operating cash flow loss in the quarter was $126.6 million, 2.3 times the amount used a year earlier.

However, it’s not expected to maintain this level of losses over the remainder of the year. What gives me optimism is the company’s balance sheet.

It currently has cash of $456 million, and its $316.4 million in convertible notes account for just 23% of its total assets. Additionally, the interest expense on an annualized basis is approximately $15 million.

Therefore, it’s got a little wiggle room.

Bottom Line on FUBO Stock

FuboTV should be able to continue to issue debt and stock until 2025, when it’s projected it will reach profitability. But if it doesn’t keep delivering progress on that front each quarter, my colleague’s correct to think its days as an independent company could be numbered.

The company’s current Altman Z-Score is 0.99. Anything less than 1.81 suggests a bankruptcy is possible within the next 24 months. However, should its cash flow improve over the remainder of 2022, it could get to 1.81 or higher, putting its financial situation on better ground.

Overall, you should not buy FUBO stock if you’re at all risk-averse. If you can afford to lose 100% of your investment, I don’t see a problem taking a flyer under $3.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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