fuboTV: What does the subscription price hike mean for stock?

If you want a prime example of a high-growth stock that’s taken a beating since the start of the year, then Fubo TV (FUBO) is a more than appropriate case.

Interestingly, the sports-focused streamer’s shares are around 60% in the red year-to-date, while revenue and undercount are growing at a rapid rate. But that didn’t mean much to investors as the losses kept piling up. The company is banking on advertising revenue and sports betting to weather the ongoing losses, but it has now taken another step to help ease the bleeding.

FUBO is now increasing the price of its vMVPD (Virtual Multi-Channel Video Programming Distributors) Basic Package of $65/month from $5/month to $70/month. The last time the company raised prices was in July 2020, when the price increased by $5/month to $65/month.

Basically, the company merged the Basic plan with the Pro offering, which still comes in at $70/month. By mid-May, FUBO expects 100% of its “basic” subscriptions to pay $70/month. There will be no change to the Elite level offering which will remain at $80/month, while both tiers will include the Latino plan at $33/quarter.

So what is the difference between the two? The Pro offers the same sports, news and entertainment channels as the old base tier, but the DVR storage is upgraded to 1,000 hours and includes unlimited screens. The new Magnolia network is also included (previously it was only available with the Elite package).

“These additional features are designed to reduce churn,” says Needham’s Laura Martin, who notes that after A/B testing to decide what approach to take with price increases, FUBO found that “because that its more expensive plans include more channels and hours of DVR Storage as well as more concurrent viewing streams, customers were more engaged and churn was lower.” And that “maximizes LTV (Lifetime Value per customer) per customer”.

Nonetheless, Martin expects higher pricing to result in “higher attrition” in the second quarter, although the positive effect will be “higher margins and more FCF.”

Overall, the 5-star analyst maintained his buy rating on FUBO stock with a price target of $15. This target puts the upside potential at 145%. (To see Martin’s track record, Click here)

Martin’s target is just below the average Street target of $15.25, which is expected to generate returns of around 150% over the coming year. These are big gains, which are projected despite the mixed ratings; analyst consensus rates this stock as a moderate buy, based on 6 buys vs. 5 holds. (See FUBO stock forecast on TipRanks)

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