Insights

PointsBet (ASX:PBH) share price sinks 17% as expansion comes at a cost

Investors aren’t so keen on backing PointsBet today…
The post PointsBet (ASX:PBH) share price sinks 17% as expansion comes at a cost appeared first on The Motley Fool Australia. –

The share price of PointsBet Holdings Ltd (ASX: PBH) is set for its worst session since the March COVID-driven collapse last year.

At the time of writing, shares in the sports betting company have stumbled off a cliff, falling 17.3% to $8.73. This now places the share price 50% below its 52-week high set in February.

It appears the market is not satisfied with the first-quarter trading update posted by PointsBet earlier today. In response, more than 7.6 million shares have been traded as the PointsBet share price bleeds out.

Considering all the commotion, let’s dig into what could be weighing on investors’ minds today.

Competitive landscape drains cash

As my colleague, Kerry, covered earlier today, growth metrics for PointsBet remained strong in the first quarter of FY22. Namely, turnover increased 42% year on year to $979.9 million with a gross win margin of 11.9%. This continued double-digit growth for the overall company is significant. However, the eyebrows begin to raise at the question: how much does this growth cost?

As stated in its presentation, the fast-growing United States operations remain highly competitive. Although PointsBet managed to grow cash-active clients by 367% year on year to 185,880 in the United States, the fierce competition between multiple sports betting companies vying for a spot is heating up.

To defend its current markets while also branching into new ones, PointsBet has needed to push substantial amounts of money towards sales and marketing. In the first quarter, more than $46 million was spent on marketing, being the company’s largest operational expense. This considerable figure might be a contributing factor to the sinking PointsBet share price on Thursday.

While it is to be expected for a high-growth business looking to gain market share, investors might be concerned about how effective this cash splashing strategy will be in the long term. PointsBet is up against stiff competition in the form of large US companies such as DraftKings Inc (NASDAQ: DKNG), at a market capitalisation of US$38.2 billion.

In the last quarter alone, DraftKings spent US$171 million on sales and marketing — nearly five times as much as PointsBet’s budget.

PointsBet share price recently

Before today’s fall from grace, the ASX-listed PointsBet share price had been floating between $9.50 and $10.50 for the last month or so. During this time, shareholders have been left guessing as no price-sensitive announcements came forward.

Despite some positive factors, it appears the market has focused on other facets of the latest quarterly update. As a result, shareholders are now witnessing a price point that has not been seen in 14 months.

The post PointsBet (ASX:PBH) share price sinks 17% as expansion comes at a cost appeared first on The Motley Fool Australia.

Should you invest $1,000 in PointsBet Holdings right now?

Before you consider PointsBet Holdings, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and PointsBet Holdings wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Why Codan, IOOF, Orocobre, and PointsBet shares are tumbling

ASX 200 (ASX:XJO) midday update: ANZ result impresses, Fortescue higher

PointsBet (ASX:PBH) share price slides 8% after Q1 trading update

Why Goldman is tipping 47% upside for the PoinstBet (ASX:PBH) share price

3 highly rated ASX growth shares to buy

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!