FuboTV (NYSE:FUBO) investors couldn’t ask for a better start to 2025, with the stock already up ~333% over the past week. The almighty surge followed a major announcement that significantly bolstered the sports-focused streamer’s position.
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FuboTV and Disney disclosed that they will merge Disney’s Hulu + Live TV business with FuboTV, forming a new partnership to serve over 6.2 million customers across North America. The deal is anticipated to close in 12-18 months’ time.
The new business will be led by FuboTV’s current management team, with Disney holding a 70% controlling stake. As part of the agreement, FuboTV will resolve all ongoing legal disputes with Disney and ESPN related to the creation of Venu Sports. It will also settle litigation with Fox and Warner Bros. Discovery. To finalize these, Disney, Fox, and Warner Bros. Discovery will collectively pay FUBO $220 million. Disney has also agreed to provide a $145 million term loan to FUBO in 2026.
Additionally, the deal includes a new carriage agreement, under which FuboTV will develop a sports and broadcast service featuring Disney’s networks, including ABC, ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, and ESPN+. The service will also integrate ESPN+.
Echoing the market’s extremely positive reaction, Roth MKM analyst Darren Aftahi sees the announcement as a real boon for FUBO.
“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 (Venu litigation and launch, cash burn, scale, loss of content, and rising carriage fees),” Aftahi explained. “FUBO will immediately have an amended carriage agreement with Disney and Fox content, freeing up bundle and content flexibility for offerings around sports, as well as ending any pending litigation.”
Along with the cash infusion and potential term loan, Aftahi thinks FuboTV is likely to gain the most from economies of scale and improved negotiating power. However, advertising continues to be its “Achilles heel,” though it stands to benefit from Hulu’s influence.
If FUBO effectively leverages the economies of scale offered by the merger, both in cost savings and bundle growth potential, Aftahi thinks the shares could command a higher valuation multiple in the future. Reduced cash burn would alleviate investor concerns, while the new term loan could help mitigate the risk of further dilution from its convertible note.
“Once closed,” Aftahi summed up, “a re-acceleration in subscriber growth and retention metrics, alongside margin expansion, would signal to us that the economies of scale, new carriage leverage, and added content flexibility could unlock faster growth and share price appreciation.”
For now, though, Aftahi remains on the sidelines with a Neutral rating, although his price target goes from $2 to $4.75. Still, following the huge gains, this suggests the stock is now overvalued by 13%. (To watch Aftahi’s track record, click here)
Overall, most Wall Street analysts remain on the fence here – 5, in total – and with an extra 2 Buys and 1 Sell, the stock claims a Hold (i.e. Neutral) consensus rating. The average target stands at $3.91, implying the stock has overshot by 28%. (See FUBO stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
