Webush dropped its bullish stance on Fubotv Inc FUBO Wednesday.
The stock is trading down nearly 10% after gaining more than 40% Tuesday as the sports streaming company held its investor day.
The Fubo Analyst: Michael Pachter downgraded FuboTV from Outperform to Neutral and lowered the price target from $6 to $5.
The Fubo Takeaways: FuboTV held its investor day on Tuesday, sharing lofty goals and expectations with investors.
The company will need to reduce its spending and raise more capital, Pachter said in the Wednesday downgrade note.
“Despite all of the company’s bold targets relayed at its investor day, fuboTV needs to raise capital and cut cash burn rapidly or it will be out of cash within a year,” the analyst said.
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If you’re an investor, you never want to hear that a company is running out of cash. Stock offerings to raise capital dilute the value of shares and often send share prices lower.
It’s unclear now if FuboTV plans to raise capital in the near future, but Pachter said it is a strong possibility.
It's uncertain how dilutive a capital raise will be or how quickly FuboTV's cash burn will improve, he said.
While the analyst said the company has a "solid head start" on live sports, a healthy advertising business and a compelling opportunity, the "slowing subscriber growth, fierce competition, inflation and rising content costs" faced by FuboTV make Wedbush less bullish in the near-term.
"We see a lot of uncertainty imbedded in guidance and would like to see meaningful progress before becoming more constructive on shares after the recent run-up," Pachter said.
FUBO Price Action: FuboTV shares were trading down 10.94% at $5.66 midday Wednesday.
Photo courtesy of FuboTV.
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