From a speculative point of view, it’s easy to see the appeal of streaming media specialist FuboTV (NYSE:FUBO). Early last month, the company generated positive vibes (finally) by securing a deal with Disney (NYSE:DIS)-owned Hulu + Live TV. In the transaction, Disney acquired a 70% majority stake in the combined entity, which will operate under the Fubo name and remain publicly traded.
Fundamentally, the merger aims to enhance consumer choice through the delivery of a broader array of programming packages, effectively leveraging the combined 6.2 million North American subscribers from both services. Of note, Fubo will debut a new Sports & Broadcast service, which will feature Disney’s premier sports and broadcast networks, including ABC and ESPN.
On surface level, the agreement appears to be a resounding net positive for FUBO stock — and it very much is. That’s why shortly after the terms were announced, the equity skyrocketed. Moving forward, the issue isn’t so much about whether the deal is a good one for shareholders who bought FUBO at around a buck. No, it’s about whether prospective investors today should pay four or five times that amount.
That’s a much different narrative, which is why investors will want to approach FUBO stock soberly. IN particular, FuboTV has a history of substantial financial losses and negative cash flow, raising questions about forward sustainability. Looking out over the horizon, concerned investors will surely take note of the industry’s high content licensing costs. This overhang has previously led to the loss of content from major providers.
If FUBO stock can ride out the above storms, it would then have to contend with intense market competition. Obviously, the streaming ecosystem is highly competitive, with established players holding significant market share. Yes, there are opportunities available but the arena could also tighten to the point where it’s only accessible to an elite few enterprises.
While investors on either side of the aisle can debate the fundamentals of FuboTV, ultimately, where FUBO stock will head next will obviously be determined by the market. The problem is, the equity carries a negative bias, making it difficult to have confidence in the underlying business.
Over the past five years, data viewed stochastically — that is, devoid of any context aside from the temporal — shows that a position entered at the beginning of the week only has a 45.88% chance of rising by the end of it. Over a four-week period, the long odds drop to 41.41%. Obviously, that’s not good.
However, the issue with FUBO stock is that even under dynamic conditions, the negative bias remains. For example, FUBO is on pace to gain around 4% this week. Following a one-week return of up to 5%, the chances of the equity rising over the subsequent four weeks falls to 37.78%.
What’s more, investors don’t buy the dip either. Under circumstances when FUBO stock loses 10% or more in a one-week period, the long odds over the next four weeks sits at around 40%. No matter how you look at it, FUBO suffers from a negative bias.
Bottom line, by the options chain expiring March 7, the security could drop around 13% or a landing spot of $3.53. With that in mind, the $6 put could be an intriguing proposition. As of Thursday’s close, the ask of this put was $210, putting the breakeven price at $3.90.
