While it’s been a volatile year for equity markets, some companies have performed exceptionally well. FuboTV (NYSE: FUBO), a sports-focused streaming platform, is one such example: The company’s shares are up by 90% year to date. The secret behind FuboTV’s performance isn’t much of a secret: The company is merging with a competing streaming service that will enhance its position in the field. These new developments make FuboTV’s stock worth holding on to for the next decade, despite it already soaring this year.
FuboTV got rid of a significant potential risk
FuboTV faced significant headwinds entering the year. The company’s paid subscriptions growth in North America was declining while it lost members in its rest of the world segment. The streaming specialist was also consistently unprofitable, although it had made some improvements on that front. FuboTV’s most crucial challenge, though, was potential competition from a proposed sports streaming platform called Venu.
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This initiative had the backing of three media giants: Disney, Fox, and Warner Bros Discovery. Considering FuboTV was already having difficulty increasing its market share and turning in a profit, a challenge from this platform might have meant its demise. Since Venu would have been a small part of the businesses of those three media juggernauts, they could have operated the platform at a loss for a while to attract enough customers and kill the competition, before eventually increasing their prices.
Image source: Getty Images.
Unsurprisingly, FuboTV was fighting the Venu initiative in courts with antitrust allegations. However, recent developments have fixed the problem. FuboTV is set to merge with Disney’s Hulu+ Live TV. The combined streaming entity will have 6.2 million subscribers in North America (the stand-alone FuboTV service currently has around 1.6 million). Importantly, FuboTV settled all antitrust lawsuits with the parties involved in the Venu initiative, which has now been canceled.
With FuboTV getting rid of one of its most important risk factors and significantly increasing its subscribers thanks to its merger with Hulu+ Live TV, the stock looks far more attractive.
Some things are worth more than money
FuboTV also got a much-needed cash infusion as part of the deal. It will receive a payment of $220 million from Disney, Fox, and Warner Bros Discovery. If that wasn’t enough, the company will receive a $145 million term loan from Disney next year. All of that will improve FuboTV’s financial situation, but there is something else investors should be even more excited about. Disney will become FuboTV’s majority owner, although the latter company’s management team will stay in place.
Having the backing of Disney will be an invaluable asset on which it is hard to put a price tag. Disney has long been a successful media company. Its entry into streaming was a hit. While FuboTV was struggling, it will receive direction and guidance from its new majority owner, one with proven experience in the field. And of course, the new FuboTV will become more diversified across different streaming niches beyond sports.
Meanwhile, there remains substantial room to grow in the streaming market. It accounted for 43.8% of television viewing time in the U.S. in March, according to some estimates, higher than the 38.5% it grabbed in March 2024. While there is still plenty of competition, the new FuboTV will combine a leading brand in the sports niche, a leading brand in live TV, significant financial flexibility, and invaluable experience from a media leader that can unironically say, “Been there, done that.”
That makes the company’s long-term prospects attractive, even as its shares have soared this year. FuboTV’s upside potential might be limited in the short term, but it should deliver solid returns over the next decade.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walt Disney, Warner Bros. Discovery, and fuboTV. The Motley Fool has a disclosure policy.
