PointsBet (ASX:PBH) share price extends losses on Friday, down 25% this week

Things have gone from bad to ugly for PointsBet.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The PointsBet Holdings Ltd (ASX: PBH) share price is down another 9% on Friday to $7.85 at the time of writing.

It was even worse in earlier trading with the PointsBet share price falling to a 12-month low of $7.73.

Shares in the sports betting darling have tumbled 24.4% in the past two trading sessions. This follows the company releasing its first-quarter trading update on Thursday morning.

Side-on view of a devastated male investor laying his head on his laptop keyboard

Image source: Getty Images

Was the first quarter update really that bad?

The first-quarter update reads well at face value, with strong growth across all key operating metrics.

Group turnover increased 42% on the prior corresponding period (pcp) to $979.9 million.

The gross win margin (dollar amount received from clients' losing bets less the dollar amount paid to clients' winning bets, excluding promotional costs) improved to 11.9% from 10.2%.

Overall net win lifted 76% to $67.3 million (net win includes promotional costs).

The number of cash active clients continued its upwards momentum, bolstered by a 367% increase in US clients to 185,880.

From a financial perspective, however, PointsBet continued to burn through cash worth $38.1 million in the September quarter.

PointsBet has followed a "spend money to make money" narrative. Its FY21 results highlighted a 159% increase in revenue to $194.7 million, fuelled by a 314% increase in losses to $164.3 million.

Since its initial public offering in June 2019, PointsBet's valuation has ballooned to $2.7 billion, even after this week's sell-off.

During this time, the company has initiated three capital raisings to help fund its US growth plans.

As the company continues to burn through cash to capture market share in the lucrative US sports betting market, investors might finally be asking, "What's the end game?".

Another factor potentially weighing on the PointsBet share price is its failure to grab an Arizona licence.

According to the company's earnings call, PointsBet CEO Sam Swanell said:

We thought we had a license and it was subsequently not – our partner was subsequently not included in the list of licenses that have been handed out.

PointsBet will be in Arizona. Any state that has 20 available licenses, PointsBet will get into that state. The question – the big question is when."

An ugly year for the PointsBet share price

The PointsBet share price rallied almost 50% between January and mid-February, briefly hitting an all-time high of $17.60.

But things have only gone downhill from there.

Whether it's the company's immense cash burn, capital raising overhang or investors losing interest in its US growth story, PointsBet is now down 31% year-to-date.

Motley Fool contributor Kerry Sun 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.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Lynas, PLS, and TechnologyOne shares are falling today

These shares are having a poor session on Tuesday. What's going on?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

Why A2 Milk, Brambles, Elders, and Tuas shares are sinking today

These shares are starting the week in the red. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why Alkane Resources, Bapcor, PLS, and Resolute Mining shares are sinking today

These shares are ending the week in the red. But why?

Read more »

Lines of codes and graphs in the background with woman looking at laptop trying to understand the data.
Share Fallers

Why CBA, Paladin Energy and CSL shares crashed  9% to 17% this week

Investors sent Paladin Energy, CSL, and CBA shares tumbling this week. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Bapcor, Coles, Graincorp, and Xero shares are tumbling today

These shares are having a poor session on Thursday. What's going on?

Read more »

A woman looks shocked as she drinks a coffee while reading the paper.
Share Fallers

Why on earth is the Bapcor share price crashing 21% on Thursday?

Investors are pummelling Bapcor shares today. But why?

Read more »

A couple sits on a sofa, each clutching their heads in horror and disbelief, while looking at a laptop screen.
Healthcare Shares

Down 59%: Will CSL shares ever regain momentum?

Here's what to expect over the next 12 months.

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why CBA, Healius, Paladin Energy, and Temple & Webster shares are sinking today

These shares are having a tough time on hump day. But why?

Read more »