I need to warn you, before I begin, that today might not be the most auspicious day for Gumshoeing or investing. I’m no astrology buff, and enjoy poking fun at the astrology-based investment strategies as much as anyone else (yes, they exist), but the outlook for Leo this morning (my astrological sign) caught my eye — here it is, from this morning’s Boston Globe:
So will we be dealing with confusion or deceit today, in this look at the latest pitch from the Oxford Club? Might we not have the complete picture?
Let’s find out, shall we?
The ad in question is from Matthew Carr, who edits the new Trailblazer Pro service for the Oxford Club and is recruiting new subscribers ($1,495/yr is the price, though he says it’s “valued at $4,000”, you get a free second year for being a guinea pig and signing up early — and unlike most higher-cost letters, they do promise a refund on this one, so hand claps to them for that).
And the key promise is that he’ll reveal to you his favorite pick, what he calls “potentially the biggest recommendation of my career” (if I had a buck for every time I’d seen that promise from a pundit over the past 20 years, I’d have bought an NFL team by now), and it comes in the form of a “special report” that he calls “The Future King of Streaming: My Next Record Breaker.”
So that’s our target, dear friends, we will wade through the deceit and confusion, horoscope be damned, and find out what he’s talking about for you. Ready?
I know, I know, I need an editor — six paragraphs in and he asks if we’re ready?
This is how he describes it on the order form, just to skip to the end:
“This small streaming company is compiling ALL the biggest live event broadcasts from the NFL, MLB, NHL, NBA and more.
“Its streaming service has 100-plus channels…
“And its revenue is up nearly 5,000% over last year.
“That’s BLINDING growth.
“Best of all, it’s trading for just $26 per share.
“I’m not sure when or if I’ll find another play with this much profit potential.”
Whatever could it be? I’ve got a fair idea already, and you might too, but let’s check out the other hints he drops in the ad, just to be sure we understand his pitch and prediction…
He establishes his bona fides by saying that he had the top-ranked service from the Oxford Club last year, and that one reason was his ability to pick a couple fantastic growth stocks — the one he mentioned is Sea Limited, which at the time of this pitch had gone up 316% in less than a year (he must have recorded this data at right around the one-year mark, in April, because SE has continued to soar and is now closer to a 700% gain if you bought in April of 2020 (I didn’t buy until May, personally, so my equity stake in SE is up “only” 450% or so).
Everyone had some crazy gains last year, of course, if they had any interest in technology or growth stocks at all, so we should probably clear that 300% idea from our heads for the moment… but what’s next? Here’s a bit from the ad:
“You see… I’ve found a new play that I think has the potential to be one of my best ever, along the lines of Magnite and Sea Limited.”
And he goes on to explain why he’s looking at the streaming business…
“Netflix is the #1 stock of the 2010s.
“From its IPO in 2002 to now…Are you getting our free Daily Update
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“It’s delivered a 45,100% gain….
“But the truly genius thing about Netflix is…
“How PROFITABLE it is.
“Every new subscriber is pretty much 100% profit.
“Yes, Netflix has to pay for new content and pay its employees, BUT…
“It doesn’t cost Netflix anything extra when you sign up.”
That’s a good concept, and it’s the heart of the reason why software companies are usually among the most profitable investments in the world — scalability. If you can make the same content (a computer program, a TV show) and sell it to 10,000 people, then double up and sell it to 20,000 people without incurring much extra cost for those additional customers, your profit margins explode higher. Growth without meaningful additional product costs is the dream.
And while we all know streaming is a big deal, Carr says he thinks it has “a lot of room to run” — he cites an expectation that it’s a $400 billion business today and will more than double to $850 billion by 2027. I don’t know where he gets those numbers or what they mean, Netflix is by far the biggest name in streaming and has only $25 billion in revenue, and even if you count YouTube as “streaming” their revenue is about the same as Netflix, but I’m sure there’s some rationale.
More from Carr…
“… the next big growth story in streaming isn’t going to be whichever huge company beats Netflix.
“All that hypergrowth is over.
“However, there is a HUGE streaming market that is virtually untapped…
“LIVE events and sports.
“It’s BIG, BIG money….
“The NFL generated $4.5 billion in broadcasting revenue in 2019…
“The English Premier League produced $3.83 billion…
“The NBA clocked in at $3.12 billion…
“And Major League Baseball brought in $1.65 billion.”
So that’s his idea… starting to have a guess?
Here’s another clue:
“The money that other streaming platforms like Netflix, Disney+ and HBO Max are leaving on the table by not having live sports…
“This $26 stock is aiming to grab it all.”
And then we get into some specific clues…
“… it’s already making money – RIGHT NOW.
“At the end of the first quarter of 2021, this company had 590,000 paid subscribers, who streamed 228 million hours of content.
“As a result, this stock pulled in $119.7 million in revenue in that quarter alone.
“Its net profit margin is up 67% over the past year…
“And its revenue is up – get this – FIVE THOUSAND PERCENT.”
And it looks like Carr also recommends leverage in these positions, so he throws an options bet on top of the stock…
“I expect the stock gain to be a giant winner.
“And the options play I’m recommending with it, although higher risk, also comes with 7X potential in the next five months.”
(And yes, we just started seeing the ad recently and it’s dated August, so it should still be pretty current — which means he’s very likely pitching January 2022 call options).
What, then, is this secret stock? Thinkolator sez he’s touting FuboTV (FUBO).
How does this jibe with Carr’s clues? The 590,000 paid subscribers was accurate at the end of the first quarter, and they did stream 228 million hours of content. They added 43,000 net subscribers that quarter, so their total subscriber number rose 105% over that year, and streaming hours grew a little faster, up 113%.
And yes, they did have $119.7 million in revenue, which was 135% growth — and importantly, $12.6 million of that is advertising, which is the part that’s somewhat scalable (ad revenue depends not on how many subscribers you have, but on how many hours they watch and what advertisers are willing to pay — FuboTV presumably has to pay the content creators per subscriber, like a cable distributor does, but not per hour).
This is really a baby company, with a market cap of about $4 billion (though that’s about 10X what EchoStar paid to buy competitor SlingTV back in 2007, just for some context). They’ve only been around for about five years, and traded over the counter for a while after merging with another firm called FaceBank last year, so they do have some history — but if you look at the stock price charts or financials going back before mid-2020 they refer to FaceBank, not Fubo, the history before last year doesn’t really mean much or reflect FuboTV’s operations.
FuboTV really started to scale up and get investor attention when they raised a big chunk of cash in their IPO on the NYSE late in 2020. Revenue was really up 5,000% in 2020, though that was from starting at an extremely low level and they’re certainly not going to show that kind of percentage growth again.
“Making money” doesn’t have a legal definition, and Carr can get away with the term, but I think of “making money”