Stocks that Face Continued Struggles in 2025 and Beyond, Cautioned Against Investing
Some stocks occasionally experience significant price drops due to short-sighted reasons, providing a great opportunity for smart and patient investors to buy the dip. However, there are instances where shares move in the wrong direction due to valid reasons. In such cases, it's usually wise to steer clear unless there are compelling reasons to believe the affected corporation can weather the challenges it's facing.
Currently, this applies to fuboTV (FUBO 2.13%) and Chegg (CHGG -1.79%), which have consistently underperformed the market for the past two years and are now considered penny stocks. Although they appear to be affordable options, they are not worthy investments for the following reasons.
1. fuboTV
fuboTV is a well-known streaming service specialist with a focus on sports. Despite some victories in its niche, it has been grappling with numerous issues.
fuboTV continues to operate at a loss. At the same time, its revenue and subscriber growth have significantly slowed down in recent periods. In the third quarter, fuboTV's revenue surge by 20.3% year over year (just about half its growth rate in Q3 2023) to $386.2 million.
The situation for fuboTV is precarious, but some might argue that it's improving financially. In the third quarter, the company's net loss per share dropped to $0.17, significantly better than the $0.29 reported in the year-ago period. However, fuboTV faces other significant challenges, including intense competition.
Netflix is increasingly focused on entering the sports streaming market. It recently hosted a highly anticipated boxing match and plans to broadcast pro football games on Christmas Day.
These initiatives don't represent a significant threat to fuboTV…yet. However, Netflix could decide to expand its footprint in sports streaming. In such a scenario, it could siphon market share from fuboTV.
That's not all. fuboTV is involved in a legal battle to prevent Venu from launching. Venu is a potential competitor to fuboTV backed by three media giants: Disney, Fox, and Warner Bros Discovery. If Venu ever sees the light of day, it could be catastrophic for fuboTV.
fuboTV may emerge victorious from this legal battle, but if it's already struggling to turn a profit and needs a potential competitor to stay out of the market to do so, that doesn't speak well of its underlying business strength. Consequently, investors would be advised to steer clear of fuboTV, despite its struggling share price in recent years.
2. Chegg
Chegg is an online learning platform that allows students to seek help from experts on textbook or homework problems. Although the service has benefited many students, Chegg now faces a serious challenge: the rise of artificial intelligence (AI). Cutting-edge AI chatbots like ChatGPT can assist students with writing essays and solving problems across a wide range of disciplines.
The result is that many students perceive Chegg as obsolete. Chegg's financial results and subscription growth have been dismal in recent years.
To be fair, this trend predates the launch of ChatGPT. Chegg has failed to maintain the incredible pace it had during the early pandemic years. Nevertheless, the AI uprising exacerbated the situation even further. In the third quarter, Chegg's revenue dipped by 13% year over year to $136.6 million. The company had 3.8 million subscribers, a decline of 13% compared to the year-ago period. Chegg's net loss per share soared to $2.05 in the third quarter, far worse than the $0.16 recorded in the previous quarter.
Is there a way forward for the company? Chegg has attempted to integrate AI-supported services. Students appreciate the combination of AI and human expert assistance, according to Chegg.
Chegg's AI-related initiatives could succeed, but considering its current state, betting on a comeback seems risky. And until Chegg's AI offerings prove their worth, investors should maintain a healthy distance. There's a chance that those who invest in the stock today could end up with worthless shares in a few years.
Given the current financial struggles of fuboTV and Chegg, savvy investors may consider these price drops as potential opportunities for investment, if they believe these companies can overcome their challenges. However, appropriately allocating money and resources in finance involves careful analysis and consideration of factors such as company performance, market trends, and competitive landscape. In the case of both fuboTV and Chegg, their ongoing financial losses, intense competition, and negative market trends present significant risks that investors should carefully assess before investing their money.
