Zhitong Finance App learned that Litchfield Hills Research released a report reaffirming Fubo Group's (03738) “buy” rating and target price of HK$15 due to long-term changes in content access methods protected by intellectual property (IP) and the growth potential of falsified/stolen IPs driven by artificial intelligence (IP), as well as the stock's attractive valuation.
The report notes that with the development of direct-to-consumer (DTC) streaming media, the need to protect video content is growing exponentially. The agency said that through streaming media, digital content has moved to the DTC model. Unlike cable television, which has strict control over content, this is now the primary responsibility of every content provider. According to Statista, there are over 1 billion video streaming users worldwide. Also, the demand for content isn't limited to cable TV. According to Gartner's 2022 estimates, streaming services and protected video content could appear on any of 650 million laptops, tablets, and video phones. None of this includes all DTC content that the company protects on YouTube.
Counterfeited/stolen IPs derived from artificial intelligence are also an opportunity for Fubo Group. The advent of artificial intelligence is increasingly important to content developers, as this technology can develop fake and appropriate content. The company currently has protection schemes for NFTs and is developing new products to keep up with the appropriate content used in AI-generated content.
In addition, Fubo Group provides customers with a variety of services. By the end of 2022, the company had 335 customers, many of which are well-known brands, including Disney (DIS.US), Netflix (NFLX.US), HBO, Sony Pictures, and Amazon (AMZN.US) Prime Video. For its customers, the company provides a suite of services, such as tracking possible loss of royalty revenue on social media or video-on-demand platforms (available on demand), or subscription services to monitor platform usage or continuously track content. In 2022, the company formed new partnerships with key customers on YouTube, which will drive further growth. Notably, Fubo Group's customer retention rate is over 95%.
Fubo Group also has a well-protected technical moat. The technology behind the company's success is well-protected and extremely valuable. Over the past five years, its proprietary technology has helped it grow at a five-year CAGR of 120%. Although the company has only 11 US patents, these 11 patents have been cited 396 times by companies such as Google (GOOGL.US) and IBM (IBM.US) in their own US patents.
In terms of stock prices, Fubo Group has an extremely attractive valuation. The current stock price of Fubo Group is about 80% lower than the agency's 12-month target price of HK$15, and about 50%-60% lower than the average price of peers.