PointsBet Holdings Ltd (ASX:PBH) is an Australian-based sports wagering operator and iGaming provider that offers innovative sports and racing betting products and services to clients via its scalable cloud-based technology platform. The company has operations in Australia, the United States, and Canada, and has a partnership with NBC Sports in the US market. However, despite its impressive growth and expansion, the company’s share price has been underperforming in the ASX recently. In this article, we will look at some of the reasons why PointsBet Holdings Ltd fell behind its competitors in the ASX and what are the prospects for the company going forward.
PointsBet Holdings Ltd’s Recent Performance
One of the main reasons why PointsBet Holdings Ltd’s share price has been declining is its disappointing financial results. The company reported a net loss of $153.5 million for the half-year ended 31 December 2022, which was a 66% increase from the same period a year ago. The company attributed the loss to increased marketing and operating expenses, as well as higher taxes and depreciation. The company’s revenue also fell by 9% to $184.4 million, mainly due to lower turnover and margin in Australia.
Another reason why PointsBet Holdings Ltd’s share price has been falling is its decision to sell its US business to Flutter Entertainment plc (LON:FLTR) for $2 billion. The deal was announced on 15 May 2023 and is expected to close by the end of the year, subject to regulatory approvals. While the deal will provide PointsBet Holdings Ltd with a significant cash injection and allow it to focus on its core Australian and Canadian markets, it also means that the company will lose its exposure to one of the fastest-growing and most lucrative sports betting markets in the world. The US market is estimated to have a total addressable market (GAM) of $12.1 billion to $20.3 billion by 2025, according to PointsBet Holdings Ltd’s own estimates.
A third reason why PointsBet Holdings Ltd’s share price has been lagging behind its competitors is its lack of product differentiation and innovation. The company’s flagship product, PointsBetting, is a unique form of sports betting that allows clients to win or lose more depending on how right or wrong their bet is. However, this product has not been able to attract enough customers or generate enough revenue for the company, as it is considered too risky and complex by many punters. Moreover, the company has not been able to launch any new products or features that could give it an edge over its rivals, such as live streaming, cash out, or bet builder.
PointsBet Holdings Ltd’s Future Outlook
Despite its challenges and setbacks, PointsBet Holdings Ltd still has some opportunities and strengths that could help it recover and grow in the future. One of these opportunities is its expansion into Canada, where it launched its operations in Ontario in December 2022. Canada is a promising market for sports betting, as it has a large population of sports fans and a favorable regulatory environment. According to Eilers & Krejcik Gaming, Canada could have a GAM of $5.4 billion by 2023.
Another opportunity for PointsBet Holdings Ltd is its partnership with NBC Sports, which gives it access to a large and engaged audience of sports viewers in the US market. The partnership, which was signed in August 2020, makes PointsBet Holdings Ltd the official sports betting partner of NBC Sports for five years. The partnership provides PointsBet Holdings Ltd with exclusive rights to integrate its content and products across NBC Sports’ platforms, including television, digital, mobile, podcasts, and radio. The partnership also gives PointsBet Holdings Ltd access to NBC Sports’ data and analytics capabilities, as well as marketing support.
A third opportunity for PointsBet Holdings Ltd is its in-house technology platform, which gives it full control over its product development and delivery. The company has a team of experienced developers who build, manage, and operate a self-sustaining system that includes the betting engine, mobile and web-based applications, secure cloud and land-based storage, and more. The company’s technology platform allows it to offer a fast and immersive client experience that can be customized and tailored to different markets and preferences.
