MarketBites Daily Investment Commentary: FuboTV vs Short-Seller Report| AMC: Value Play Or Value Trap

Stock Market Commentary for 12/31/2020:
  • The General Theme:
    The stock market closed in the green, fueled by the signing of the coronavirus aid bill, and the rollout of vaccines worldwide. Investors remain hopeful that the bullish run in equities will spill over into 2021.
  • Stock Talk:
    – The S&P 500 dropped 34% in March due to Covid-19, only to rally 66.85% from trough to peak.
    – The tech-heavy NASDAQ rallied almost 45% this year, or 87.6% from trough to peak.
    – 22 million Americans lost their jobs at the height of the pandemic
    – The U.S. government spent a record $6.5 trillion
    – The Federal Reserve pumped at least $3 trillion into the economy
    – IPOs dominated: Companies raised $167.2 billion through 454 offerings on U.S. exchanges, compared with the previous record of $107.9 billion at the height of the dot-com boom in 1999 (according to Dealogic).
    – Tesla became the world’s most valuable car company (up 707%)
    – Zoom Video turned into a household name (up 488%)
  • Coronavirus tracker: Per Johns Hopkins, the U.S. reported 199,597 new cases yesterday, and current hospitalizations are at 124,693.  The U.K. approved a coronavirus vaccine developed by AstraZeneca and the University of Oxford.

By Raymond Kanyo

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Top Investment Story #1: FubuTV Shorted

What is Happening?

Shares of FuboTV have been in a tailspin for the last week, dropping 46% since December 22nd. The stock’s rapid decline came after two short-sellers published reports on the company, which questioned its business model and valuation.

Why does this Matter?

FuboTV is one of the hottest stocks of the year. The company went public in October at $10/share, and it peaked at $62/share on December 22nd. FuboTV is another live-streaming, virtual TV channel provider such as Youtube TV, Sling, or Hulu Live TV, but it caters more to sports enthusiasts. The company also likes to tout its desire to get into sports betting – an industry that has recently received a lot of buzz on Wall Street.

FuboTV’s subscriber base has grown from 286,000 at the end of June, to 455,000 accounts by September. The firm expects to top 500,000 paid subscribers by the end of this year. The company’s ad revenue soared 153% in its latest quarter, which is more than double the 64% surge in subscription revenue. However, FuboTV remains wildly unprofitable, losing $274 million on $61 million of revenue last quarter.

The most recent drop in the stock price came as “Kerrisdale Capital” issued a short-seller report on the company. In the extensive report, Kerrisdale cites that FuboTV’s subscription revenue will never generate meaningful profits, and that competition from SlingTV (Dish), Hulu Live (Disney), YouTubeTV (Google), AT&T TV Now leave no room for a small player like FuboTV. The short-seller believes that the company is worth a mere $10/share.

The Takeaway:

Short-sellers tend to get a bad reputation because their reports often cause stocks to plummet. If you are a potential or current investor in FuboTV, it may be wise to read both the short seller’s full report, and a bullish take such as this one, to get a well-rounded picture.

-By Raymond Kanyo

– Published in MarketBites Daily Newsletter

Top Investment Story #2: AMC: Value or Trap

What is Happening?

AMC is attempting to issue 50 million new shares of its stock. The largest cinema chain globally, is hoping to raise $125 million to stave off bankruptcy. AMC’s stock traded 5.7% down on the news, and has slumped 70% since January.

Why does this Matter?

AMC is desperately trying to build up its balance sheet to withstand the combination of lockdowns, and the shift in the movie business towards online streaming. Currently, AMC burns through $115 million of cash each month, and the company only has a couple hundred million $ left in its coffers.
Earlier in December, AMC received a $100 million investment from Mudrick Capital Management, but the company still needs at least $750 million to survive through 2021. This led AMC to reiterate in several SEC filings, that bankruptcy is possible if it can’t raise more funds.

Even if AMC can somehow manage to raise enough capital to survive for another year, the outlook for the movie business remains grim at best. Bloomberg estimates that in 2021, the American box office will net a mere $4 billion, compared to $11.3 billion in 2019. AMC does have an on-demand streaming service that could offset the decline in movie theater revenue; however, the offering faces stiff competition from the likes of Amazon and Apple.

The Takeaway:

At $2.16/share, AMC might look like a bargain, but the company faces an existential crisis. Strong evidence points to the fact that the pandemic didn’t cause, but accelerated, the mass shift towards video streaming. If AMC happens to find a way to fight through the pandemic, it will continue to face pressure from a movie business that no longer values the box office.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter

Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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