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Why the Pointsbet share price is outperforming today

The Pointsbet Holdings Ltd (ASX: PBH) share price is outperforming the market this morning after it announced securing an operating license in one US state.

The Pointsbet share price jumped 1.2% to $5.72 even as the S&P/ASX 200 Index (Index:^AXJO) gave up early gains to trade 0.2% in the red at the time of writing.

Shares in the online bookmaker is also outperforming other tech darlings. The Afterpay Ltd (ASX: APT) share price gained 0.3% to $68.45 while the Xero Limited (ASX: XRO) share price fell 0.6% to $91.21.

New gaming market opens

Investors got excited after Pointsbet’s subsidiary was issued a temporary operating permit by the Illinois Gaming Board.

This means Pointsbet can start retail and online sports betting operations that state. This assumes its partner, Hawthorne Race Course Inc. will also be granted a Master Sports Wagering Licence.

Illinois only recently passed legislation allowing online sports betting. The governor of the state signed the legislation into law on 28 June, 2019, and there’s a race among companies to start offering these services to the public.

COVID-19 tailwind for the sector

Online shopping got a big boost from the COVID-19 pandemic, and online betting is no exception. Consumers that are stuck-at-home and practicing isolation are looking for entertainment. You only need to look at the Netflix Inc (NASDAQ: NFLX) share price to see what I mean.

From that perspective, Pointsbet will benefit from this trend. The COVID-19 outbreaks at Star Entertainment Group Ltd’s (ASX: SGR) Sydney casino underscores this point.

Another support for the Pointsbet share price

Further, investors hunting for an alternative to the Jumbo Interactive Ltd (ASX: JIN) share price might also be drawn to Pointsbet.

Jumbo’s share price was hit hard as it needs to pay Tabcorp Holdings Limited (ASX: TAH) more to sell its online lotteries. Being beholden to one large commercial partner always carries risk.

This also explains why the Jumbo share price collapsed 28% since the start of calendar 2020 when Pointsbet rallied 20%.

A good ASX bet

But Pointsbet isn’t the only company that will benefit from the shift to online gambling. The Aristocrat Leisure Limited (ASX: ALL) share price should also do well.

While Aristocrat’s land-based business of supplying poker machines to casinos, hotels and clubs is impacted by social restrictions, its digital gaming division is the key growth driver for the group.

It’s social gaming apps are very popular and are among the most downloaded apps on Apple and Android phones.

Aristocrat is one of my key ASX stock picks for FY21.

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Brendon Lau owns shares of Aristocrat Leisure Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Netflix. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Netflix 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.

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