You don’t have to tell FUBO (NYSE:FUBO) investors that what goes up, almost always comes back down, as they have been on a roller coaster ride over the past couple of weeks. Since its debut on Wall Street back in October of this year, shares have skyrocketed by nearly 1150% as the streaming TV company captured the hearts of investors everywhere. Often, it is these high volatility stocks that can be difficult for both investors and analysts to properly value, so after a huge run-up on essentially the frothiness of a shiny new stock, there are those out there who like to take advantage.
In the case of Fubo, it comes in the form of short sellers who are attacking the stock with varying reports and criticisms of the structure of its business. The first case was from Lightshed Partners which labelled Fubo as one of the most attractive cases for a short that they have ever seen. Lightshed claims that the excitement over Fubo’s desire to establish itself as a broadcast for the sports betting industry is overblown and that regulatory issues and a lack of a sportsbook partner will bury this before it ever begins. Lightshed goes on to say that just because Fubo is a streaming company, it should not be compared with the likes of Netflix ($586.79|16.94%).
The second short-selling report came from Kerrisdale Capital which reiterated what Lightshed claimed. Kerrisdale was very critical of the business structure and revenue streams from subscriptions which have already substantially slowed down since November. Kerrisdale’s price target of $10 was slightly above Lightshed’s low target of $8 per share. The bearish reports came within days of each other and caused Fubo’s stock to plummet by over 55% from its recent highs of $62.29.
What may be the most surprising thing out of all of this is how much investors take into account short-seller reports in comparison to positive analyst reports and upgrades. Investors need to know that these companies often have a short position in the stock and stand to gain when panic selling kicks in and the stock’s price drops. Similar reports caused stocks like Nikola ($19.53|-3.77%) and Kandi (NASDAQ:KNDI) to free-fall earlier this year. So do short-sellers have a point about Fubo? They very well may, but investors should note that these analysts have an agenda to lower the stock price, rather than raise it.
So is it all doom and gloom for Fubo investors? Not exactly. There are multiple analysts with bullish outlooks for Fubo and price targets that are well above today’s current levels.
Fubo has now corrected to the point where it may be back in bargain territory before long, and this prolonged mega-dip may be the point at which investors who missed out during the first run-up can buy in. Investors may want to wait until Fubo is able to stabilize though as the stock could be hit with more negative reports over the next while as the downward momentum continues. Keep an eye on the price and if Fubo management can continue to take strides in growing the company.
Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.