Shares of FuboTV (FUBO -12.92%) were pulling back today after a surge last week that came on an agreement to merge with Disney‘s (DIS -0.53%) Hulu + Live TV.
There wasn’t any company-specific news out on Fubo today, but after digesting the news, investors may think that the Fubo stock rally was overdone. A risk-off day in the market, driven by increasing bets that the Federal Reserve may not cut interest rates this year, also seemed to fuel the sell-off.
As of 1:10 p.m. ET, the stock was down 11.2%.
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The Fubo rally fades
Investors cheered the announcement of the Fubo/Hulu + Live TV deal last week as the stock more than tripled in a single day.
In some ways that makes sense as Disney will own 70% of the new Fubo as Hulu + Live TV makes up the bulk of the new subscriber base. But a lot of questions remain even after Disney called off the sports streaming joint venture Venu, which was expected to be a competitor to Fubo. Fubo shares declined on Friday after the announcement.
Today, investors seem to be continuing to question the strategic rationale for the merger. Fubo is currently unprofitable and Disney has only just reached profitability in its streaming division, but it’s unclear if Hulu + Live TV is profitable.
Additionally, stocks fell broadly today as hopes for continued rate cuts from the Fed seem to be fading after a strong jobs report.
What’s next for Fubo
The surge following the merger news was a one-time gain for Fubo stock, and the company, or future combined company, will have to continue to deliver good news for the stock to move higher. With ESPN’s flagship streaming service set to launch this fall, the future for Fubo also seems unclear.
While the merger is better than Fubo remaining a stand-alone company, it’s far from a guarantee of success for the streaming stock.
Jeremy Bowman has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney and fuboTV. The Motley Fool has a disclosure policy.
