Why the PointsBet (ASX:PBH) share price could be in the buy zone

This sports betting company has doubled in value over the last 12 months. Here’s why the gains may not be over…

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The PointsBet Holdings Ltd (ASX: PBH) share price has been a positive performer on Tuesday.

In afternoon trade, the sports betting company’s shares are up 5% to $13.24.

This latest gain means the PointsBet share price has now more than doubled in value since this time last year.

Can the PointsBet share price go higher?

According to a recent note out of Goldman Sachs, there still could be plenty of upside left in the PointsBet share price.

Its analysts currently have a buy rating and $17.20 price target on the company’s shares.

Based on the latest PointsBet share price, this implies potential upside of 30% over the next 12 months.

Why is Goldman Sachs bullish?

Goldman Sachs believes that PointsBet is well-placed for growth in the coming years thanks to its strong position in a rapidly growing United States market.

It commented: “We forecast a US$39 bn sports betting TAM at maturity, implying a 40% CAGR out to 2033. As such, we believe PBH is well positioned to benefit from this multi-year high growth opportunity ahead as more US states begin to allow online sports betting, and see a path for it to achieve ~10% share overtime. Further, we believe the staged state by state opening derisks the US rollout story while we also believe there is upside risk from other adjacent revenue streams such as media/ads and iGaming which we believe is not reflected in market valuations.”

The broker also sees scope for scalability benefits.

Its analysts explained: “We see scalability benefits ahead, particularly in the US, given i) full ramp-up of its exclusive NBC partnership, the US’s largest sports broadcaster (>184 mn viewers), ii) driving marketing efficiencies, iii) scale benefits as it continues to roll out in more US states, and iv) iGaming and cross-selling opportunities ahead.”

And finally, although its valuation may look stretched using traditional metrics, Goldman actually sees a lot of value in the PointsBet share price.

It commented: “While PBH is currently trading on ~6x forward EV/sales (below the recent avg), we believe this does not accurately reflect the significant long runway of growth ahead for the business. Over the next three years, we forecast a revenue CAGR of 97%, which compares favourably against a large basket of peers (25% ex Aus peers) and US SB/iGaming peers of 35%, trading on >11x EV/Sales. Notwithstanding different business models/scale, we believe PBH’s multiple gap to US operator DraftKings (DKNG) should converge closer over time.”

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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