The PointsBet (ASX:PBH) share price is falling today despite the company delivering record growth as it continues to capitalise on US growth.
The post PointsBet (ASX:PBH) share price falls despite 174% revenue growth appeared first on The Motley Fool Australia. –
PointsBet Holdings Ltd (ASX: PBH) shares are languishing today following the company’s release of its FY21 first-half (1H21) results. At the time of writing, the PointsBet share price has slumped 1.8% to $15.24.
Today’s release marks the company’s first interim result following its transformational media partnership with NBCUniversal.
PointsBet share slumps on triple-digit growth
The PointsBet share price is failing to respond today despite the company delivering a group net win of $82.8 million, up 177% on the prior corresponding period (pcp). Net win is defined as the total amount of gaming income after prizes or winnings have been paid out. At the revenue level, which is typically close to the net win, the group recorded a 174% increase from $27.4 million to $75.1 million.
From a geographic perspective, a record net win was delivered in Australia of $84.8 million, up 211%. Meanwhile, PointsBet’s United States presence continued to scale, with a 345% increase in betting turnover to $819.1 million. The region’s net win came in at a loss of $2.0 million.
The number of active clients on the platform also continued to grow, with users in Australia and the US doubling to 211,000 from 102,000 in 1H20.
US sports betting, a runway for growth
Sports betting in the US was illegal up until May 2018, when the Supreme Court ruled that the 1992 federal ban on sports betting in most states violated people’s rights.
The US sports betting market is seen as a land grab opportunity for bookmakers to rapidly grow their customer bases and revenue. Morgan Stanley and JP Morgan are bullish on the sector, estimating the US sports betting and iGaming industry to be a US$12 billion opportunity by 2025.
PointsBet currently has operations in New Jersey, Iowa and Indiana. Operations in Illinois are scheduled to commence in September 2020 with Colorado commencing in November.
The continued strong performances in the US has seen PointsBet grow its online handle market share to 10.8% in New Jersey, 8.9% in Illinois, 3.8% in Indiana, 2.4% in Iowa and 1.0% in Colorado.
The company is pulling on its NBC Sports media assets to continue targeted marketing activities in New Jersey, Indiana and Illinois.
The significant growth opportunity does come at a cost of significant marketing expenses and a string of net losses in the short to medium term. For the half, PointsBet delivered an earnings before interest, tax, depreciation, and amortisation (EBITDA) loss of $69.0 million. Its sales and marketing expenses surged from $20.6 million in 1H20 to $62.9 million in 1H21. Despite the losses, the company had $388.3 million in cash and cash equivalents to support its growth story moving forward.
What’s next for PointsBet?
PointsBet is focused on the development and launch of its iGaming product as consumers move away from in-person casino gambling to mobile apps. The company is running this product in-house, with complete control over its product roadmap, unlike some competitors which are reliant on third parties.
PointsBet is targeting an inaugural launch in Michigan in 2H21, followed by New Jersey. Elsewhere, the company hinted at a potential launch in New York and Canada.
Based on the current PointBet share price, the company has a market capitalisation of around $2.85 billion.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
- Why Computershare, IAG, Northern Star, & PointsBet shares are pushing higher
- Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher
- Why the PointsBet (ASX:PBH) share price is jumping higher
Kerry Sun owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of 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.