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Is Pointsbet’s US Expansion A Worthwhile Bet For Investors?

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Pointsbet Holding (ASX: PBH) is an Australian small-cap (market capitalisation is around $480M) company with a presence in the Australian and US sports betting markets. The firm is seeking to leverage recent US regulation which legalises sports betting. Pointsbet has positioned itself as the fastest growing online bookmaker in the US. Despite listing on the ASX as recently as June 2019, the stock has already nearly doubled as investors recognise the size of the firm’s opportunity in the US.

Pointbet - report

The firm prides itself on its innovative sports betting format known as ‘Spread Betting’. The results of Spread Betting depend on the accuracy of the bettor, with winnings/losses remaining variable until the end of the game betted upon. For example, the bettor will win a larger return if their team wins by a larger margin. On the flip side, the bettor’s losses could exceed the value of their initial bet.

At the moment, Pointsbet’s US operations are in New Jersey and Iowa alone. The firm currently has access to 10 US states with estimated market size of US$4.6B. The firm has already established itself with >120,000 registered clients and 5.4% of New Jersey’s online betting turnover. US search traffic on Google for Pointsbet more than doubled from August to September according to google trends. Revenue is currently tracking at over 240% compared to last year.

Pointsbet appears to be gaining traction with American consumers. Firms like Pointsbet often achieve strong lifetime value for investors as consumers interact with the firm at higher rates over time and tend to remain loyal to the firm. This is particularly true in the gambling industry, where the product has addictive qualities. There are further short-term share price catalysts for Pointsbet, with the firm expanding into some of the states where it has access. These states include Illinois, West Virginia and Indiana. 42 US states have legalised or intend to legalise sports betting (with varying state-specific regulation). It is clear that there are strong structural tailwinds for Pointsbet and other firms with US sports betting operations.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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