FuboTV Inc
Fubo Impact: Roth MKM analyst Darren Aftahi calls the Disney tie-up a potential "fairy tale outcome" for Fubo that could help the company benefit in the streaming space.
The analyst reiterated a Neutral rating on Fubo and raised the price target from $2 to $4.75.
Aftahi said the deal, which will see Disney own 70% of the combined company with FuboTV and Hulu+LiveTV, is expected to close in 12 to 18 months.
"The combined company would feature enhanced economies of scale and content flexibility, removing much of the risk around FUBO, including litigation," Aftahi said.
The analyst said the combined new company will have around 6.2 million subscribers, with 1.6 million from Fubo.
Revenue growth could be around 10% for the combined company with revenue of $6.5 billion to $7 billion in 2026, the analyst said.
Fubo and Disney combining assets could result in cost savings and better opportunities for Fubo to offer bundling options to consumers, Aftahi said. This includes Fubo having access to Disney and Fox content outside of the Hulu+LiveTV bundle.
"The potential deal would make FUBO one of the largest vMVPD operators and remove many of the risks that have been an overhang on shares."
Aftahi said advertising is the "Achilles heel" for Fubo, an area that could benefit from Hulu's impact.
"The economies of scale and enhanced negotiating leverage likely offer the biggest benefit to FUBO, alongside the cash infusion."
As part of the deal, Disney, Warner Bros. Discovery
The three media companies have a pending sports streaming platform Venu Sports, which Fubo sued to block from launching.
Aftahi keeps the Neutral rating due to needing more updates on how organic subscriber growth will look under the new business model.
Disney Impact: On the other side of the deal, Macquarie analyst Tim Nollen says the tie-up creates more options for Disney, but won't move the needle much financially.
"For Disney, the combined company takes away the responsibility of managing Hulu + LiveTV, while incorporating more revenue - at a low earnings profile compared with Disney overall, but perhaps better than Hulu + LiveTV stand-alone," Nollen said.
The analyst maintained a Neutral rating on Disney with a $110 price target.
Nollen said the tie-up gives Disney three options to stream sports. Fubo will create a new Disney sports and broadcasting package, Disney will likely launch the Venu sports platform with litigation settled and Disney is expected to launch its ESPN flagship DTC platform in August.
"In a TV landscape where streaming is rapidly replacing pay TV, and more live sporting events are appearing on streaming services like Netflix, Disney is ensuring it has its bases covered with broader reach for ESPN in the future."
Nollen said the Fubo deal is good news for Disney and the streaming industry.
FUBO Price Action: Fubotv stock is up 6.32% to $5.38 on Tuesday versus a 52-week trading range of $1.10 to $6.45. Fubo stock is up over 300% on the week.
