UPDATE: Roth Capital Downgrades fuboTV (FUBO) to Neutral

Roth Capital analyst Darren Aftahi downgraded fuboTV (NYSE: FUBO) from Buy to Neutral with a price target of $4.25 (from $7.50).

The analyst comments "Downgrade to Neutral as cost of subscriber base yet to be offset by better advertising. Ad revenue came in ~19% lower, and while some of those headwinds were macro-related and a delay in FUBO’s new ad tech stack, it marked the second quarter of ad ARPU compression. Given subscriber related expenses still outpace revenue (net negative margin), we believe consistent expansion of that ad component remains the lynch pin to FUBO realizing a meaningful reduction in cash burn (~$127M in 1Q). While FUBO is pushing subs to higher ARPU plans and working to negotiate better content costs, with slowing growth we find it hard to be more constructive on shares given the consistent burn and a sub-base with minimal margins. While FUBO expects the plan upgrade should make all subs adj. contribution margin positive, and introduce higher-margin FAST (free ad-supported streaming TV content/channels), it remains to be seen what impact that may have overtime on consumer’s wallets (especially in the wake of inflation) and the potential for further content escalation costs. As such, we are moving to the sidelines, downgrading shares to Neutral from Buy as we wait to see a tangible path to profitability with an ad business performing below expectations and a consistent need to spend for sub acquisition and to maintain that base. While its $456M in cash ($204M raised via ATM in 1Q at ~$7.52) is expected to get FUBO to year-end 2023, it still requires additional financing in FY24 (potentially sooner if subscriber costs aren’t offset by a faster ramp in ad ARPU). Utilizing our revised FY22 sales estimate of ~$1.05B, we lower our price target to $4.25 from $7.50."

For an analyst ratings summary and ratings history on fuboTV click here. For more ratings news on fuboTV click here.

Shares of fuboTV closed at $4.12 yesterday.

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