FuboTV, Paramount and Roku see growing subscribers in Q3

A big question for shareholders of FuboTV, Paramount and Roku in the run-up to earnings this week was whether their streaming platforms would get a subscriber bounce, especially after Netflix revealed a couple of weeks earlier that it added 2.41 million new customers.

- All three streaming services gained subscribers in the three months to 30 September

- There are burgeoning concerns that advertisers could pull budgets this holiday season

- Cathie Wood’s flagship ARK Innovation ETF has high exposure to Roku

Streaming stocks FuboTV [FUBO], Paramount [PARA] and Roku [ROKU] all reported third-quarter earnings this week.

Roku was the first up and delivered a net loss of $0.88 per share on $761.4m in revenue, a 12% year-over-year increase. Analysts polled by the Financial Times had been expecting it to report a wider net loss of $1.28 per share on $694m. Shares in the digital media streaming company set a fresh 52-week low of $44.50 following its results after the market closed the day before. The stock recovered from being 18% down to close at $51.84, but has still tumbled 77.3% year-to-date.

Paramount’s share price also set a 52-week low on 3 November after missing on  both bottom and top line estimates. It’s down 11.90% in the past week and 46.29% year-to-date. However, it posted slight revenue growth of 5% year-over-year. Earnings per share were $0.39 on $6.92bn in revenue, narrowly missing analyst expectations of  $0.44 per share on $7.01bn.

FuboTV announced results before the market opened on 4 November, which boosted its shares up by more than 4% pre-market trading, though the stock is down 78.16% year-to-date. The company posted earnings of -$0.82, deepening from a loss of $0.74 in the year-ago quarter. Analysts polled by FactSet had been expecting a lighter loss of $0.73 per share.

Robust subscriber growth

Roku reported that it added 2.3 million subscribers during the three months to the end of September, taking the total number globally to 65.4 million. This was a small increase on the 63.1 million it had at the end of June, but up 16% from 56.4 million reported a year ago. 

Paramount’s total subscriber base hit 67 million at the end of its third quarter, up from 63.7 million at the end of June. Its rival to Netflix [NFLX] and Disney [DIS], Paramount+, added 4.6 million, taking its total to 46 million subscribers. Despite subscriber growth helping Paramount’s subscription revenue rise by 59% year-over-year, total direct-to-consumer revenue slowed from a growth rate of 56% in the previous quarter to 38%.

FuboTV surpassed one million North America subscribers in its third-quarter, a growth rate of 31% from the 937,000 it ended with in the year-ago quarter. Subscription revenue grew 46% from $138.1m to $201.9m.

Advertising pullback

Roku painted a downbeat picture in its fourth-quarter earnings. CEO Anthony Wood said on the Q3 earnings call that it “is not a normal holiday season” and the ongoing macro uncertainty means companies are likely to cancel advertising budgets. “This Q4 guidance … begs the question if Roku’s management is baking in unusually high conservatism or if Roku’s business mode is structurally impaired,” wrote Evercore ISI analysts in a note to clients, as reported by Reuters.

Analysts at Goldman Sachs reiterated a ‘sell’ rating on Paramount following earnings, citing how profitability in its subscription and advertising segments “could see greater pressures as cord-cutting accelerates and the economic backdrop becomes more difficult,” according to a client note seen by Investing.com.

Meanwhile, Fubo shares have a consensus ‘hold’ rating from eight analysts polled by the Financial Times, as well as a median price target of $6.00, a 77% upside on its recent close of $3.39.

ETF performances

Roku is still the third-biggest holding in Cathie Wood’s flagship Ark Innovation ETF [ARKK], with a weighting of 6.63% as of 4 November. The fund is down 61.6% year-to-date and down 6.9% in the past week.

The fund holding the largest weight of FuboTV, at 0.14%,is the iShares Micro-Cap ETF [IWC]. The fund is down 20.9% year-to-date and 2.9% in the past week.

Invesco’s S&P 500 Equal Weight Communication Services ETF [EWCO] has the highest exposure to Paramount, assigning it a weighting of 3.64%. The fund is down 30.6% year-to-date and 5.9% in the past week.