The PointsBet Holdings Ltd (ASX: PBH) share price was out of form on Tuesday and tumbled notably lower.
The sports betting company's shares sank over 9% to $12.27.
This latest decline means the PointsBet share price is now down 32% from its 52-week high.
Is this a buying opportunity for investors?
According to a note out of Goldman Sachs, the recent weakness in the PointsBet share price could be a buying opportunity.
This morning the broker initiated coverage on the company's shares with a buy rating and $17.50 price target.
Based on the latest PointsBet share price, this implies potential upside of almost 43% over the next 12 months.
What did Goldman Sachs say?
Goldman has been impressed with the company's progress in the Australian market over the last few years and notes that it is now making inroads into the rapidly growing US sports betting market.
The latter is being underpinned by a 20-year partnership with Penn for market access into a number of states and a five-year exclusive media partnership with the largest sports broadcaster in the US, NBCUniversal.
It is the US market that Goldman sees as the key driver of growth for PointsBet in the future.
Goldman explained: "We see PBH as well-placed to carve out a niche share of the burgeoning US sports betting market, which we forecast to reach US$39 bn at maturity, implying a robust 40% CAGR out to 2033."
"We are bullish on the US TAM opportunity ahead and PBH, given i) exposure to significant growth opportunities in the US and upside from adjacent/cross selling, ii) scalability benefits over time driving efficiencies, iii) upside risk to long-run sustainable margins, iv) early adoption of owning its proprietary tech stack which we see as highly important in the US context, and v) strong management and board, with a proven execution track record."
And while the PointsBet share price trades on sky high multiples compared to the rest of the market, the broker believes its growth profile justifies this and notes that its shares are actually cheap in comparison to its peers.
It concluded: "On valuation, we highlight our forecast of >90% revenue CAGR over the next three years, yet on an EV/sales basis PBH screens as the cheapest among a basket of peers."
