FUBO Stock Looks Like an Excellent Bet At a time when consumers may be showing signs of streaming fatigue, FuboTV is gaining subscribers and keeping them engaged on its platform for a longe...

FuboTV (NASDAQ:FUBO) surged over 11% the day after impressing investors with a stellar earnings report. The company beat estimates on both the top and bottom lines. But it was only getting started.

The company reported a 138% increase in total paid subscribers to 682,000. This was significantly higher than its own estimates of between 600,000 and 625,000 subscribers. Better still, the company upped its forecast for new subscribers to 910,000 to 920,000 which would be a 67% year-over-year increase from the midpoint of 2020. The company also raised its full-year revenue guidance to between $560 million and $570 million in revenue.

Investors are frequently encouraged to lean into trends. In the case of FuboTV, investors are leaning into two significant trends. The first is the trend towards streaming TV and the second is the growth of online sports betting. In fact, some are calling FuboTV a combination of DraftKings (NASDAQ:DKNG) and traditional cable. Let's look at how each of these relates to FuboTV.

Carving Out a Niche In Streaming

On the streaming front, FuboTV presents investors with a differentiated approach to streaming. Namely, the 6-year old company targets the sports-minded viewer. To that end, the addition of the ESPN family of networks last year filled a significant gap in the streaming service's offerings.

In the streaming segment FuboTV is similar to Sling TV in that it gives consumers an experience that feels a lot like traditional cable TV. This comes at a cost. In this case, Fubo doesn't have any original programming like Netflix (NASDAQ:NFLX). Nor does it have the syndicated content like Hulu or NBCUniversal which offers its Peacock service via Comcast (NASDAQ:CMCSA).

However, the company doesn't believe this is an obstacle. In fact, they believe that the consumer is coming back around to a more aggregated approach that FuboTV provides. Generally, the company is betting that cord cutters are more interested in changing the delivery method than the content. And specifically, the company is betting that the ability to view live sports will be a key factor in the streaming service they select.

This seems like a good bet. The company is showing that its viewers are spending more time on the platform. In the earnings report, the company noted that viewers streamed 245 million hours through the second quarter. That's a 148% YOY increase that is taking place as the economy opens up.

Keeping Customers in Their Ecosystem

In terms of the company's sportsbook, which it plans to launch by the end of the year, FuboTV has secured market access in four states: Pennsylvania, Indiana, New Jersey, and Iowa. The company acquired the online sportsbook Vigotry in January 2021 after its purchase of Balto Sports in December.

Although, companies do have to apply for regulatory approval in individual states, the mobile sports betting sector is loaded with competitors. However, that absence of a moat does not appear to be an obstacle. For now, the pie is large enough for many companies to participate.

A potential advantage for FuboTV is that they will already have an audience viewing content via their service. Human nature being what it is, it may allow the company to gain significant market share from customers who will stay within the company's ecosystem.

And an important point to note is that, at this time, any revenue estimates are not factoring in a contribution from the company's sportsbook.

It's Not Too Late to Buy FUBO Stock

Short interest on FUBO stock as of last month was still above 21% with a short interest ratio of 2.0. That's a little uncomfortable, but I don't view it as a reason to avoid the stock. FUBO is one of the stocks that has the attention of the retail investment community.

To me, this simply means that you should be careful on the size of the position you take as there could be some volatility in this stock.

If you're expecting FUBO stock to get back to its 52-week high, you're likely to be disappointed. However, if you simply look at what the analysts are projecting, there's a fair amount of growth left in the stock. The consensus price target among eight analysts is for a price of $39.75 which is over 25% than its current price.

Streaming services are likely to experience some contraction as the economy reopens and consumers reassess their viewing habits. FuboTV offers a differentiated offering that appeals to a loyal viewer base. Throw in a way for those customers to bet on sports and you have a recipe for stock price growth.