Sports-focused streaming company FuboTV (FUBO 5.04%) is one of the top-performing stocks in the market on Tuesday. As of 11 a.m. ET, Fubo’s stock is up about 25%.
However, this pales in comparison to the stock’s massive 250% gain on Monday, which came on the back of its deal with Disney (DIS 0.61%) to merge its streaming service with Disney-owned Hulu+ Live TV.
Disney and Fubo are gearing up to take on YouTube TV
If you are unfamiliar with the details, Disney will be a 70% owner of Fubo (which will be the combined company) when the deal closes in 12 to 18 months. The services have 6.2 million subscribers between them and could become more appealing to consumers when combined.
After all, Fubo offers a unique assortment of regional sports networks and news channels, while Hulu+ Live has a more traditional lineup (plus Disney is the majority owner of ESPN). In other words, this isn’t just a merger of similar streaming services — there’s a complementary nature between the two.
It’s worth noting that Hulu itself, as the on-demand streaming service, will remain fully owned by Disney. The deal only includes the live TV part of Hulu. As part of the deal, Disney will pay $220 million in cash to Fubo and provide a $145 million term loan in 2026.
A big win for Fubo and its investors
Unsurprisingly, Fubo received some analyst upgrades after the game-changing deal with Disney. For example, Wedbush, which has an “outperform” rating on the stock, more than doubled its price target from $3 to $6.40 on the news. This is likely contributing to the second wave we’re seeing in the stock on Tuesday.
Perhaps most significant for shareholders, the combined business is expected to be cash-flow positive immediately after the deal closes. Fubo has produced negative net income and operating cash flow for years, so this is a big change.
Matt Frankel has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney and fuboTV. The Motley Fool has a disclosure policy.
