The Pointsbet Holdings Ltd (ASX: PBH) share price has soared by more than 30% in one month.
Pointsbet is a corporate bookmaker, much like that of Sportsbet and William Hill. It has its own scalable cloud-based platform that aims to disrupt traditional fixed odds betting by offering new and innovative ways to place bets on Australian and US sports.
Innovation is Key
Innovation, technology and user experience is key in driving growth. Jumbo Interactive Limited (ASX: JIN) is a prime example of a model company that has leveraged its class-leading mobile app, online lottery syndication and its own software as a service for lotteries to drive sales. In FY19, Jumbo delivered a phenomenal 64% increase in revenue and a 123.5% increase in net profit before tax. The company has ambitions to reach $1 billion in ticket sales by FY22, which would represent more than triple the sales it achieved in FY19.
Pointsbet’s point of difference
Pointsbet is leading the betting market with its innovative points bet system. But what transforms Pointsbet from being grounded by heavy competition in the domestic market is its operations and licenses in the US.
The US Supreme Court overturned the federal ban on sports betting back in May 2018. This has allowed states to individually manage their own laws with the incentive to collect corporate taxes. There are currently 13 states that have legal regulated sports betting industries. And six states that are close to having legal sports betting in the near future.
The growth of the US sports betting market has already exceeded expectations with the American Gaming Associating recently tweeting that more than $11 billion has been legally wagered in the US in just 12 months:
More than $11 billion has now been legally wagered across the country, adding $115 million in tax revenue to state and local governments. pic.twitter.com/HEzyj9QzIh
— American Gaming Association (@AmericanGaming) October 2, 2019
Pointsbet is well-positioned to take full advantage of the young US market. It currently has access to 10 US states with an estimated market size of US$4.6bn. The company has formed some key partnerships including one with wagering giant Penn National Gaming. This agreement grants Pointsbet access to conduct sports wagering across five states including Ohio, Indiana, Missouri, West Virginia and Louisiana.
FY19 marked a significant milestone for Pointsbet. The company highlighted strong top-line growth, achieving 244% YoY growth in turnover, as well as a 5.4% share of online turnover market share in New Jersey. Pointsbet is in a strong position with $75m cash in the bank and will continue to invest heavily in marketing and promotions to solidify its brand within the US market.
The Pointsbet share price is currently trading at $3.81 per share.
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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited and Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.