PointsBet adds Virginia to US foot-print

PointsBet (ASX: PBH) has launched online and mobile betting operations in Virginia, marking the company’s eighth operational state in the US. 

Virginia is the 12th largest US state by population and 13th in terms of GDP, according to World Population Review. 

While the market isn’t as lucrative as ‘cash cows’ like New York or Florida, it’s no doubt a much bigger opportunity than some existing operational states like West Virginia and Iowa. 

PointsBet hopes to hit the ground running through its media and marketing partner, NBC Universal. 

It is understood that NBC will provide PointsBet with year-round, multi-platform media and marketing opportunities across its portfolio of events. 

“Our partnership with NBC Sports has positioned us well as we enter the market,” said PointsBet USA CMO Kyle Christensen.

“Viewers who have become familiar with the PointsBet brand through our odds integrations and expert analysis during television broadcasts can now truly experience what sets PointsBet apart," Christensen added.

Growth stocks fall on hard times

PointsBet shares have fallen on tough times, down almost 60% from February highs of $17.60. 

PointsBet represents a classic high growth and immense cash burn narrative. 

In FY21, the company delivered a 159% increase in revenue to $194.7m, and all of its relevant growth metrics, including betting turnover and active clients, grew by more than 100%.

However, its growth came with a hefty price tag. 

PointsBet losses continued to mount, surging 314% from $39.7m in FY20 to $164.3m in FY21.

To fund its growth, PointsBet has actively turned to its shareholders for more capital. Since October 2019, the $2bn company has raised a total $825m on three separate occasions. 

The loss making nature of stocks can often be overlooked when the market is running hot with a risk on attitude. 

In more recent times, amid surging inflation, omicron jitters and looming interest rate hikes, PointsBet’s valuation has come back to earth. 

What brokers think 

Broker consensus views PointsBet as a “Strong Buy” with a target price of $10.80, suggesting a 51.2% upside compared to today's prices.

Credit Suisse is particularly bullish with a $12.80 target price but acknowledges the loss making nature of the business, recently raising its FY22-24 losses estimates.

PointsBet has consistently delivered triple-digit growth ever since it listed in July 2019.

However, the business looks like it needs some expensive training wheels to keep it going for quite some time.

On an EV/sales basis, PointsBet has historically been the cheapest amongst global peers.