All investors have some stocks they just don't like. Maybe they don't like the industry, or perhaps there's something about the company's business model that rubs them the wrong way. For me, two such stocks are streaming company fuboTV (NYSE: FUBO) and cryptocurrency exchange Coinbase (NASDAQ: COIN). Here's why I'm avoiding these two stocks.

fuboTV

Sports-centric streamer fuboTV is having no trouble winning subscribers, but it's having an awful lot of trouble turning a profit. The company's subscriber count in North America surged 20% year over year in the third quarter, and average revenue per subscriber jumped 17%. This led to total revenue growing by 43%, an impressive figure.

The problem that has always plagued fuboTV is that its costs are simply unstainable. The situation has improved, but the company's gross margin was just 6% in the third quarter. fuboTV made progress knocking down costs relative to revenue in the third quarter, but it's nowhere close to turning a profit. With $321 million in revenue, the company posted a net loss of $84 million. Through the first nine months of the year, free cash flow was a loss of $163 million, putting the company on pace to burn through more than $200 million of cash this year.

There's only so much fuboTV can do to boost its gross margin since content costs are generally incurred on a per-subscriber basis. Growing advertising revenue will help the cause, but advertising represented less than 10% of revenue in the third quarter. Other initiatives, including the company's sports betting service, have been abandoned.

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This puts fuboTV in a race against time. The company had $260 million in cash at the end of September, likely enough to get it through 2024. Raising more cash will be tricky. fuboTV's stock has tumbled since the pandemic, so raising a meaningful amount of cash through a secondary offering would seriously dilute shareholders. And taking on debt will likely be expensive, given the rise in interest rates.

fuboTV is targeting positive cash flow in 2025, but first, the company needs to make it to 2025. It's unclear how fuboTV plans to go from burning around $200 million in cash annually to breakeven. I personally don't buy it. The advertising business can help, but advertising revenue would need to explode in the next two years to make it happen.

With severe limitations on what can be done to lower costs, I don't see the fuboTV story ending well. I'm staying far away from this one.

Coinbase

Cryptocurrency exchange Coinbase is no longer reporting mountainous losses after slashing costs, but the company's results haven't exactly been inspiring. Coinbase thrived during the pandemic-era cryptocurrency bubble, but that bubble has long burst. Trading volumes have since collapsed, and a series of frauds and scandals have tarnished the industry. Rival FTX turned out to be a massive fraud, and other rival Binance recently agreed to a $4.3 billion settlement with the U.S. Department of Justice over fraud and money laundering charges.

Coinbase has the potential to emerge as the last man standing in the crypto industry, but that won't mean much if interest in cryptocurrency never picks back up. Coinbase's total trading volume fell by more than 50% in the third quarter compared to the prior-year period. The company pointed to a lack of volatility as one driver of the decline.

It would appear that Coinbase requires a cryptocurrency bubble, or at least some sort of frenzy, to produce acceptable financial results. The current muted environment, where the belief that you can get rich quick by trading cryptocurrencies has largely faded, is a big problem for the company.

Coinbase has boosted revenue in areas outside of transaction fees, but this is largely a consequence of higher interest rates. Coinbase is earning more interest income on its cash, and the money it generates from its USDC stablecoin reserves is also a function of interest rates. Coinbase's non-transaction revenue jumped by nearly 60% in the third quarter, but that won't be repeatable unless interest rates rise further.

Coinbase has aggressively reduced its workforce and slashed spending, but it's still unprofitable. While the company reported a small $2.2 million net loss for the third quarter, this included one-time benefits related to debt extinguishment and strategic investments. On an operating basis, the company reported a loss of $80 million on $674 million in revenue.

Coinbase is valued at around $30 billion, or more than 10 times the expected 2023 revenue based on the company's results so far and its fourth-quarter guidance. If you believe that cryptocurrency is the future of the financial industry, then maybe you can justify paying such a high price. But if Coinbase's business only works during cryptocurrency manias, which I think is likely the case, that valuation is absurd.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coinbase Global and fuboTV. The Motley Fool has a disclosure policy.

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