Is BlueBet or Pointsbet the better bet right now?

Sports bookmakers are exploding at the moment. So which one's the better bet for investors?

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Some sports betting companies have been growing rapidly in recent years as the industry scrambles for a piece of the newly opened US market.

Gambling on sports was, for a long time, illegal in most states in the US. But, in recent years, many states have legalised the activity, sending both local and Australian bookmakers into a frenzy.

One that made its debut on the ASX just this month is Bluebet Holdings Ltd (ASX: BBT).

So how does the upstart compare to a veteran sports betting provider like Pointsbet Holdings Ltd (ASX: PBH)?

BlueBet has returned 44% in 2 weeks

According to Shaw and Partners portfolio manager James Gerrish, after only a couple of weeks, BlueBet has easily surpassed its initial public offer share price.

"BlueBet Holdings has been on a roller-coaster ride since its recent ASX debut but it's well above the $1.14 where the company raised $80 million," he said in his Market Matters newsletter.

"The company now has a market cap of $338m and… has flagged its intention to expand into the US which is becoming a well-trodden path thanks to a change in legislation."

BlueBet shares closed Tuesday at $1.64, which is 44% up from its IPO price.

The big question now is whether such positive returns are sustainable.

Gerrish reminded his subscribers that with the current land-grab in the US, sports betting providers should not be judged on profitability just yet.

"Companies like this are all about gaining market share quickly, and Bluebet certainly has the leadership in place who know how to do that," he said.

"At current levels, we regard Bluebet as a stock to watch but we would like to see some progress on their plans before jumping onboard."

As a contrast, he feels like Pointsbet has more runs on the board for investors.

"Pointsbet have demonstrated the ability to do very unique deals that will lead to huge scale in the US. They've really aggressively gone for it which will pay off in spades if they execute well," said Gerrish.

"For now our preference is Pointsbet."

Pointsbet shares have returned a stunning 513.5% since its ASX listing in June 2019. The stock closed Tuesday at $12.70, which is 7.45% up on the year.

Gerrish's team holds Pointsbet in their Emerging Companies portfolio.

Motley Fool contributor Tony Yoo has no position in any of the stocks 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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