Shares in online bookmaker Pointsbet Holdings Limited (ASX: PBH) took a 7% fall yesterday.
Despite releasing strong Q3 results at the end of last month, the company’s market valuation has now fallen by around 30% since a few months ago.
PBH share price
It’s not just Pointsbet that’s been feeling the pain recently, but the broader tech sector.
The ASX All Technology (ASX: XTX) index has fallen by 13% in the past month, with losses from large capitalisation tech companies such as Afterpay Ltd (ASX: APT), NextDC Ltd (ASX: NXT), Xero Ltd (ASX: NXT) and Appen Ltd (ASX: APX) dragging down the index.
US-based sports betting company, Draftkings Inc (NASDAQ: DKNG) has also had a few rough days of trading in overseas markets. It’s likely some of the negative sentiment has translated into the Pointsbet share price.
But how is the business travelling?
While the sentiment around the sector is causing some short-term pain, Pointsbet’s underlying business has seen some explosive growth over the past few months. Here’s a quick recap of what’s happened recently.
Across the period, total turnover was up 236% to $905.2 million and the company’s number of active clients had risen by 169% to 285,000.
Pointsbet’s expansion into US markets seems to be progressing steadily and is now operational in New Jersey, Iowa, Indiana, Illinois, Colorado and Michigan.
In January, the company announced the appointment of Shaquille O’Neal to become its Australian brand ambassador.
In March, Pointsbet announced it will acquire Banach Technology Limited, which will aim to help capitalise on the growing trend of in-play sports betting, which is estimated to represent around 75% of all sports betting within the next three years in the US.
Time to buy the Pointsbet dip?
Pointsbet is clearly executing on its growth strategy successfully, both domestically and internationally. If I was a shareholder of the company, I most likely wouldn’t be selling at these levels. But I don’t think I’d be a buyer either.
With a $2.5 billion market capitalisation and estimated FY21 revenue of around $200 million, it seems as though the market has fairly valued the US opportunity into its current valuation.
I’m more interested in finding companies that are potentially misunderstood by the market, which could result in an asymmetric return payoff skewed to the upside. Based on how hard Pointbet’s shares have run recently, I think there could more attractive opportunities elsewhere.
If you’re on the hunt for other ASX growth shares, I’d recommend getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
