Shareholders of fuboTV (NYSE:FUBO) have been on a wild ride since the company went public last year. After a sharp spike up on high potential and speculation, a short-seller report helped knock shares right back down.
After the calendar turned, shares started marching back up with a gain of more than 50% in January. But since the beginning of February, the stock has dropped by 55%, including a decline of more than 15% today.
There was some minor news from the company earlier this week but nothing that should have impacted the direction of the stock. Fubo filed its annual report for 2020 yesterday, but there doesn’t look to be anything investors didn’t already know. Without any company news, it’s likely the stock is just following the recent rotation out of high-growth names into industrials and value stocks.
The drop in Fubo shares since mid-February coincides with the drop in the Nasdaq composite from its recent highs. But while the Nasdaq is down about 7% since that time, fuboTV shares are off more than 50%.
That’s not overly surprising, however, for speculative stocks at high valuations. Fubo’s business continues to grow. Both revenue and subscriber growth are accelerating, with fourth-quarter revenue over $100 million for the first time. And paid subscribers numbered almost 550,000 as of the end of 2020, with 17% of them added in the fourth quarter.
The still unprofitable company is estimating more than 70% revenue growth in 2021. But even using that estimate, the valuation is still five times sales even after the recent share-price decline. Combining high growth with high valuation is going to cause the stock price to swing, and investors should expect that to continue going forward.
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