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In a market of slowing growth, fuboTV continues to deliver strong results.

Companies in the streaming video space have not been delivering the strongest fourth-quarter results. In mid-February, Roku (NASDAQ: ROKU) reported short-term headwinds due to supply chain pressures, and investors sent the stock tumbling. Netflix (NASDAQ: NFLX) also disappointed investors, and shares are down nearly 24% since it reported earnings in early February. 

One company in the space that has fared well operationally despite its peers' struggles was fuboTV (FUBO -6.27%). It focuses on providing live TV and live sports on its platform, and as one of the only platforms catering to the live-sports niche, it has seen rapid adoption. In Q4, its revenue grew 119% year over year to $230 million, driven by subscriber expansion of 106%. (Those figures exclude its acquisition of Molotov, France's top live-streaming service, which closed during the quarter.) At the end of Q4, the platform had more than 1.1 million users. As consumers continue to cut the cord and move to streaming platforms, I think Fubo could see continued growth, which is why I think it is a good time to pick up shares. 

Image source: Getty Images.

Continued growth across the board

Fubo made impressive strides in improving its profitability picture. The company's net loss was $112 million in Q4, which still represented over 48% of revenue. However, it was down 43% compared to its $195 million net loss in the prior-year period. Fubo's free cash flow burn was $198 million in 2021, but this only grew 33% compared to 2020 -- much slower than the company's top-line growth. Fubo still has a long way to go before these metrics are strong, but it is certainly moving in the right direction. 

Fubo also noted that it has been rapidly gaining market share in the virtual multichannel video programming distributor (vMVPD) space. (Simply put, vMVPDs offer packages of linear TV channels much like cable and satellite companies do, but via the internet rather than via their own infrastructure.) Its Q4 growth was 2.75 times faster than the average among its peers, suggesting that the company is quickly gaining market share.

A key risk for the business has been that it is easy for customers to drop the platform. For example, soccer fan customers who are joining specifically for access to those games can unsubscribe after the season ends. However, in Q4, its churn rate decreased 269 basis points year over year, and its retention rate for subscribers that had been on the platform for six months increased by 626 basis points for the full year. This means that longer-term customers are churning less -- a great sign. 

Engagement is on the rise

This fast-growing cohort of customers is also watching more live sports on Fubo. In Q4, subscribers watched more than 404 million hours of content on the platform, up 96% year over year. This growing audience has attracted more advertisers to the platform, resulting in Q4 advertising revenue increasing 98% year over year to $26 million.

Where the company really thrived with advertising, however, was with its repeat ad buyers. Spending from this group jumped 170% in 2021, and the company's five biggest advertisers increased their spending by between 200% and 900%.

This is only the tip of the advertising iceberg for Fubo. The company launched a sportsbook service in Q4 that allows customers to casually bet on sporting events in real time. This is expected to drive up engagement, which will make its advertising space more valuable.

A competitive space

While the company's fourth-quarter showed nothing but strength, this isn't a no-brainer investment. When looking at the bigger picture, Fubo is a small fish in a massive pond, and there are plenty of direct vMVPD competitors that are much bigger than Fubo. As of September, Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) YoutubeTV -- which also focuses on live sports and news streaming -- had over 4 million subscribers. Disney's (NYSE: DIS) Hulu Live is also a big player, with an estimated 3.7 million subscribers. 

Even considering the level of competition, Fubo still has the potential to be a winner in the vMVPD market. In 2020, there were still 83 million U.S. households that had cable television subscriptions, but this figure is expected to drop to 73 million by 2023. The trend of cord-cutting and switching to streaming services like Fubo remains popular, and this doesn't seem to be slowing down. With millions of users shifting to streaming every year, there's room for many players to benefit. 

Fubo is not valued as if it will continue winning subscribers at its recent rates, however. The company trades at 1.8 times sales -- a much lower valuation than streaming platforms like Netflix or Roku, which trade at 6 times sales or higher. With such low expectations for the company, the opportunity for its share price to grow rapidly from here is immense. Because of the competitive risks and its unprofitability, it might not be wise to make Fubo your largest holding, but having a small position in it could pay major dividends in the future.

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