FUBO possible price target based on recent Merge newsDisclaimer: on the fundamental side and based on many rough assumptions, not financial advice or any kind of advice, cannot guarantee accuracy, just for fun.
A. Combined Revenue Baseline
Starting (Year 1 Post-Close) Combined Revenue:
Let’s assume the newly merged Fubo + Hulu + Live TV starts with $2.0B of annualized revenue in 2025 (the first full year post-close).
Rationale: Fubo alone was on track for $1.3–$1.4B in 2023–2024 (annualizing trends), plus Hulu + Live TV with 4.4M subs could contribute $2– SEED_TVCODER77_ETHBTCDATA:3B on its own. However, some portion of Hulu + Live TV’s revenue might remain within Disney’s broader ecosystem, so let’s keep it conservative at $2.0B combined to start.
Revenue Growth Rates:
We assume synergy-driven marketing boosts sub growth and cross-selling lifts ARPU. We’ll start with a 25% top-line growth in 2026, then step down by a few points each year as the business matures that implies strong execution on synergy, cross-promotion, and relatively stable ARPU. If growth or ARPU lags, these numbers would be lower.
B. Cost Structure (COGS + Opex)
Cost of Goods Sold (COGS):
For virtual MVPDs, content/licensing fees are huge, often 70–90% of revenue. Let’s assume Fubo, pre-merger, was around 85–90% COGS as a percentage of revenue. With scaled synergy, maybe that drops gradually.
Operating Expenses (Excluding COGS):
This category includes marketing, G&A, R&D, etc. For a growth streamer, marketing is large, but synergy should yield savings. Let’s assume total opex (ex-COGS) is 15% of revenue in 2025, declining to around 12% by 2029 as scale efficiencies kick in.
2025: (100% – 82% – 15%) = 3% margin → $2.0B * 3% = $60M
2029: (100% – 76% – 12%) = 12% margin → $3.8B * 12% = $456M
C. Depreciation & Amortization, Capital Expenditures
D&A in streaming typically is modest relative to revenue, often 2–3%. We’ll use 2.5% of revenue.
Capex can also be low as a % of revenue (streaming is more about licensing, not building data centers). Let’s assume 3% of revenue on average.
D. Taxes & NOLs
Fubo (and combined entity) likely has significant Net Operating Losses (NOLs). Over this horizon, taxes may be minimal. For simplicity, assume an effective tax rate of 20% on positive pre-tax income, but note that NOLs might defer real cash taxes beyond 2029. We’ll do a partial tax assumption in the DCF to be conservative.
E. Working Capital
vMVPDs can have some favorable working-capital dynamics (subscriber payments in advance), but also large monthly payments for content. We assume working capital changes net out near zero over time.
F. Weighted Average Cost of Capital (WACC) & Terminal Value
WACC: Let’s assume 10%. This is fairly typical for a somewhat speculative media/tech company; actual WACC might range from 8–12% depending on capital structure, market risk appetite, interest rates, and beta.
Terminal Value: End of Year 2029, we assume the business grows at 3% perpetuity. We can use either a perpetuity growth approach or an EV/EBITDA exit multiple.
EV/EBITDA Multiple: If the market is confident in stable 12–15% EBITDA margins, it may assign ~8–10x EBITDA for a vMVPD. Let’s pick 9x.
With 2029 EBITDA of $456M, TV = $456M * 9 = $4.10B (un-discounted, at end of 2029).
The perpetuity approach and the 9x multiple approach might produce similar numbers. We’ll pick $4.10B as the terminal value for simplicity.
Projected Free Cash Flow & DCF
A. Calculating EBIT, Taxes, & FCF
EBIT = EBITDA – D&A.
EBT = EBIT – net interest expense (we’ll assume interest is modest if net debt remains manageable).
Tax = EBT * 20% (though real taxes could be postponed due to NOLs).
FCF = EBIT – Taxes + D&A – Capex – changes in working capital.
2025 is near breakeven, consistent with 3% EBITDA margin minus some capex. By 2029, FCF approaches $262M.
B. Terminal Value & Present Values
Terminal Value at the end of 2029 = $4.10B (based on 9x $456M EBITDA or a perpetuity approach).
So the total un-discounted value at end of 2029 = $262M (FCF in 2029) + $4.10B (terminal value) ≈ $4.36B.
Now we discount each year’s FCF + terminal value at 10%. So the present value of all future cash flows plus terminal value is about $2.69B.
Adjusting for Net Debt and Arriving at Equity Value
Net Debt
Let’s assume post-deal Fubo has roughly $400M in net debt. (It might be lower if they effectively use the $220M settlement to pay down obligations, but let’s be conservative.)
Equity Value
Enterprise Value (DCF) = $2.69B.
Equity Value = EV – Net Debt = $2.69B – $0.40B = $2.29B.
Shares Outstanding
We need to estimate the new share count. Fubo currently has ~300M shares, but Disney will own 70%, implying significant issuance. Let’s guess total diluted shares post-close around 500M (it could be 600M, 700M… depends on the final structure, conversions, etc.).
Implied Share Price
$2.29B equity / 500M shares = $4.58 per share (present value basis).
Sensitivity Analysis
A single set of assumptions can be misleading. Wall Street analysts usually build a sensitivity table around (1) WACC, (2) terminal multiple / growth, and (3) synergy levels.
A. Terminal Multiple vs. WACC
Below is a mini-table varying WACC (vertical) and the exit EV/EBITDA multiple (horizontal):
WACC \ EV/EBITDA 7x 8x 9x 10x 11x
9% $4.01 $4.58 $5.13 $5.68 $6.23
10% $3.29 $3.93 $4.58 $5.22 $5.87
11% $2.76 $3.35 $3.93 $4.52 $5.10
(Hypothetical share prices using 500M shares, and the same baseline synergy.)
If the business meets synergy targets and the market is optimistic, awarding 10x or 11x EBITDA at a 9–10% WACC, the share price might be $5–$6+.
If synergy disappoints (leading to 7x–8x multiple or higher WACC), fair value could be $2–$3 per share.
B. Revenue & Margin Upside
If the combined company outperforms, pushing EBITDA margins from 12% in 2029 to 15%, or if revenue grows faster (e.g., SEED_TVCODER77_ETHBTCDATA:4B + by 2029), the DCF would yield a higher equity value.
Conversely, if synergy fails and margins remain single-digit, the final share price would be lower.
5) Interpretation
Illustrative Fair Value Range:
Our base-case synergy scenario (9x terminal multiple, 10% WACC) suggests $4.58 per share.
With more optimistic assumptions (e.g., 15% margin, 10x multiple, slight NOL advantage on taxes, net debt below $300M, or fewer total shares), the model could push the fair value toward $7–$10+.
Under more pessimistic assumptions (less synergy, 7x multiple, 11% WACC, or 600M+ shares), it could fall to $2–$3.
Comparing to Market Price Movements:
The stock jumped from $1.44 to around $6 on the deal announcement—a big gap from the DCF “$4.58” scenario. This often happens in M&A contexts due to immediate speculation, short covering, hype, or the possibility that synergy is bigger than the market initially expected.
Key Drivers:
Synergy: If the combined vMVPD truly drives content-cost savings and robust subscriber growth, margins will expand quickly.
Regulatory Outcome: If the deal is delayed or blocked, this entire synergy story could unravel.
Share Count: The single biggest wild card is how many shares exist post-close. If it’s 700M instead of 500M, that alone reduces the per-share price by ~30%.
Capital Structure: If Fubo uses the $220M settlement to retire more debt, net debt might be only $200M, improving equity value.
Conclusion & Takeaways
This “far more detailed” DCF approach illustrates how professional analysts might try to triangulate a fair value for Fubo after the Hulu + Live TV combination, incorporating synergy-driven margin expansion. The result is not a single price, but a range based on multiple scenarios:
Base-Case (in this illustrative model): around $4–$5 per share.
Upside (strong synergy, favorable market multiples, fewer shares, quicker margin expansion): $7–$10+.
Downside (weak synergy, higher WACC, more shares, persistent losses): $2–$3.
The exact share price depends heavily on:
Actual synergy: content cost reductions, ad revenue growth, etc.
Subscriber churn and ARPU trajectory.
Regulatory constraints on the combined entity.
Final capital structure (net debt) and total share count post-transaction.
Broad market conditions for streaming/tech stocks (risk appetite, interest rates).
