The Pointsbet share price rocketed 118% in August and our in-house pro says it’s still a long-term buy

The Pointsbet Holdings Ltd (ASX: PBH) share price is up an eye-popping 170% since 2 January. And it owes much of that surge to last month. In August alone, the Pointsbet share price rocketed 118%.

The online bookmaker wasn’t immune to the wider stock market ravages during the early COVID-19 lockdowns. Far from it. Pointsbet’s share price crashed 80% from 13 February through to 23 March. Since that low, the share price is up an astounding 995%.

These are the kinds of gains normally reserved for long shot gambles. But it was enough to see Pointsbet’s share price gain 170% year to date.

By comparison the S&P/ASX 200 Index (ASX: XJO) is down 11% in 2020.

What does Pointsbet do?

Pointsbet is an Australian online bookmaker. The company provides gamblers with traditional fixed odds markets in sports and racing, as well as spread betting. Pointsbet advertises that it offers more markets on NBA, AFL and NRL than any other bookmaker in the world.

Pointsbet shares began trading on the ASX in June 2019.

Why the Pointsbet share price is soaring and could keep running higher

While the Pointsbet share price was already performing well in late August — up 53% year to date on 27 August — it really took off the following day.

That came on the back of its full-year 2020 financial results and its announcement of a potentially highly lucrative deal with United States network NBC, which is owned by cable giant Comcast.

On the financial end, Pointsbet posted a 194% increase in total revenue. Turnover was also up 103% from the previous year, with a 191% increase in its net win results. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $6.9 million. And this was with numerous major sporting events being postponed or cancelled over the past 6 months.

As for the deal with NBC, Pointsbet agreed to spend some half a billion dollars in marketing with the network over the coming 5 years. In return, it gains access to NBC’s 184 million viewers, reaching 81% of the US sports betting market.

This may be a gamble, but the Motley Fool’s own Anirban Mahanti is maintaining his buy rating on the Pointsbet share price.

Anirban recommended Pointsbet in his investment service, Extreme Opportunities, back in October 2019. Members who followed his advice are today sitting on gains of 367%.

Here’s what he wrote to his readers following Friday’s share price surge:

While we are excited about this deal and its capacity to turbocharge Pointsbet’s growth ambitions, we are also cautious because the future outcomes are by no means certain.

Today’s ~$6.80 increase in the PointsBet share price is a one day ~242% increase on our cost basis of $2.80 for Pointsbet. No doubt this doesn’t happen every day. There will be tough days ahead too and as ever, it is the long term that counts.

Indeed, it is the long term that counts.

As for the short term, Pointsbet’s share price is up 0.8% in afternoon trading.

More reading

• Why Fortescue, Openpay, Pointsbet, & Sezzle shares are dropping lower
• Is it too late to buy the Pointsbet share price?
• How to invest in ASX shares in uncertain times?
• ASX 200 drops 0.9%, Costa reveals healthy result
• ASX Stock of the Day: Pointsbet share price surges 77% on NBC deal

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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