Why Goldman says PointsBet (ASX:PBH) share price sell off is a buying opportunity

It could be time to buy this beaten down tech share…

| More on:
a man attending a sporting match looks down at his phone with his hand over his eyes in dismay as though his sporting bet has failed.

Image source: Getty Images

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 has come under pressure again on Friday.

In morning trade, the sports betting company’s shares are down a further 10% to a 52-week low of $7.76.

Is the weakness in the PointsBet share price a buying opportunity?

The PointsBet share price has been sold off over the last couple of trading sessions following the release of its first quarter update.

According to a note out of Goldman Sachs, its analysts believe this could be a buying opportunity for investors. This morning the broker retained its buy rating but trimmed its price target to $12.79.

Based on the current PointsBet share price, this implies potential upside of 65% for investors over the next 12 months.

How did Goldman respond to the update?

Goldman notes that PointsBet delivered softer growth but stronger margins than it was anticipating during the quarter.

It commented: “PBH reported its 1Q22 update, which was characterized by: 1) Australia Net Win up 56% to A$54.8mn, well above recent peer commentary for the Sep-21 quarter, 2) strong gross/net margins in Aus of 13.9%/8.7% despite elevated promotional activity, 3) US turnover of +112% to A$348.6 mn came in softer than what was implied by our prior 1H21E, 4) however US Net Win was up 307% to A$12.5mn on 3.6% margins vs GSe 2.2% prior FY22E, and 5) overall sales/marketing spend of A$46.5 mn in the quarter was run-rating well below our prior 1H estimate of ~A$120mn.”

In addition, the broker highlights that management remains confident of operating in Arizona, as well as its 10% market share target in both Australia and the US over the long term.

Overall, Goldman has seen enough in this result to remain positive on the PointsBet share price. It feels investors should focus less on the short term and more on its long term opportunity.

It commented: “[We] Reiterate our Buy rating on PBH […] We believe the sell off is driven by the market’s focus on its short term quarterly handle market share trends; however we believe the LT thesis remains intact.”

Motley Fool contributor James Mickleboro 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

ASX shares downgrade A young woman with tattoos puts both thumbs down and scrunches her face with the bad news.
Share Fallers

Why A2 Milk, Appen, Boral, and REA shares are dropping today

These ASX shares are having bad days...

Read more »

A couple sit at a desk with tissues and tears in their eyes while they look at a laptop computer screen with a camera set up in the foreground suggesting they are making a video.
Technology Shares

What’s going so wrong for ASX 200 tech shares on Wednesday?

ASX 200 tech shares are leading the market's losses today. What's going on?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the Electro Optic Systems share price declines today on news the CEO has resigned
Share Fallers

Why Block, CBA, Mesoblast, and NAB shares are dropping today

These ASX shares are dropping on Tuesday...

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Alliance, Aurizon, MVP, and Suncorp shares are dropping today

These ASX shares are out of form on Monday...

Read more »

A person plunges into the pool with only their feet visible above the surface, diving through a heart-shaped inflatable ring.
Share Fallers

Here’s why the Medical Developments share price is sinking 17% on Monday

The share has caught sellers attention today.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Amcor, Arafura, Block, and Janus Henderson shares are dropping

These ASX shares are ending the week in the red...

Read more »

a female miner looks straight ahead at the camera wearing a hard hat, protective goggles and a high visibility vest standing in from of a mine site and looking seriously with direct eye contact.
Resources Shares

‘We are in for the long haul’: Rio Tinto CEO defends future spending in the face of recession fears

What's ahead for the mining giant?

Read more »

a man with a moustache sits at his computer with his hands over his eyes making a gap between his fingers so he can peek through to his computer screen.
Share Fallers

Why Creso Pharma, Endeavour, Orica, and Woodside shares are dropping

These ASX shares are falling on Thursday...

Read more »