The PointsBet Holdings Ltd (ASX: PBH) share price rocketed 150% higher in 2020.
The key questions to ask now are: what factors led to this surge, and can the momentum continue in 2021?
What does PointsBet do?
PointsBet is one of the fastest growing bookmakers in Australia and the United States, providing a range of sports and race betting products via its cloud-based platform.
PointsBet was founded in Australia in 2015 and entered the United States market in 2018 after signing a long-term agreement with the New Meadowlands Racetrack in New Jersey.
Since then, growth has continued on the back of numerous agreements and strategic partnerships.
FY20 Results
PointsBet served up some impressive growth in the 2020 financial year. This was aided by an increase in active clients of 39% to 111,400.
Betting turnover increased 103% to $1,152 million. Australian turnover was up 69% to $830 million and United States turnover ended up 317% at $321 million.
Net revenue for the group jumped 193% to $75.17 million. This translated into a normalised EBITDA loss of $37.6 million and a statutory loss of $41.5 million.
PointsBet is currently focused on expansion in Australia and the U.S and is therefore incurring higher operating and investment expenditures.
Transformational deal with NBCUniversal
In August 2020, PointsBet made arguably its most significant announcement to date, with shares surging 86% after advising they had signed a 5-year exclusive media partnership with NBCUniversal.
NBCUniversal’s various channels and platforms have the largest sport audience in the U.S, reaching about 184 million viewers. PointsBet will become the official sports betting parter of NBC Sports, with exclusive gameday integrations across NBC Sports Regional Networks and exclusive sports betting partner of NBC Sports Predictor app.
The deal commits PointsBet to US$393 million in marketing spend and incentives paid to NBCUniversal for customer referrals. NBCUniversal will take a 4.9% holding in Pointsbet and 66.88 million options with an exercise price of $13.00.
Following the deal, PointsBet completed a capital raising of approximately $303 million aimed at strengthening the balance sheet.
U.S Expansion
PointsBet launched in a number of U.S States and secured multiple strategic partnerships with major U.S sports teams.
In November 2020, PointsBet commenced taking bets in the State of Colorado via its subsidiary PointsBet Colorado, LLC. During 2020, PointsBet also commenced operations in Iowa and Indiana. PointsBet has also entered agreements to commence operations in further states.
PointsBet has also secured partnerships with major U.S sports teams such as the Detroit Tigers, Indianapolis Colts, Indiana Pacers, Colorado Avalance, Denver Nuggets and Colorado Mammoth.
Should you bet on the PointsBet share price in 2021?
Through PointsBet’s major deal with NBCUniversal and strategic partnerships with sporting teams, they are well placed to expand operations into additional states.
PointsBet stated its goal is to achieve a 10% share of the sport wagering and gaming market in any state it operates in, which it believes could be worth US$12.1 billion by 2025. While the U.S betting market is growing rapidly, competition is likely to intensify.
At the time of writing PointsBet has a share price of $11.84 and a market capitalisation of around $2.5 billion. Trading on a price to sales ratio of 32x, investors are expecting spectacular growth in 2021 and beyond.
While shares seem ‘expensive’, I certainly wouldn’t bet against the PointsBet share price appreciating in 2021.
