Pointsbet share price closes lower after a tough day on the ASX

The Pointsbet Holdings Ltd (ASX: PBH) share price suffered the same sting as the rest of the ASX, falling by as much as 7% during Wednesday’s session.

It finished 3.07% lower at $2.21 a share. Meantime, the S&P/ASX 200 Index (ASX: XJO) closed down 2.58% after a major sell-off across Wall Street overnight.

So what has triggered the weakness in the Pointsbet share price along with the rest of the ASX?

Pessimism grows on the back of rising inflation

Overnight reports of higher-than-expected inflation data wreaked havoc on US markets overnight, which flowed onto the ASX today.

The US consumer price index (CPI) increased 8.3% over the year to August compared to 8.5% across the year to July. Stripping out volatile food and energy prices, CPI rose 6.3% across the year to August and 5.9% in July.

Overall, these figures exceeded expectations, fueling pessimism about the future economic outlook.

As a result, ASX sectors like real estate and technology were hit hardest today, shedding 4.16% and 3.15% respectively on Wednesday.

As for the sector that Pointsbet belongs to, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) also closed 3.13% lower today.

The biggest concern for Pointsbet is the potential long-term impact of a rising interest rate environment. This will likely lead to a reduction in discretionary income available for sports betting.

Such pessimism comes at a time when the PointsBet share price was gaining a bit of momentum after opening its 12th sportsbook operation in the US.

Pointsbet has managed to grow revenue rapidly but is struggling to clamp down on operating expenses as its net loss ballooned in FY22.

The biggest drag on its bottom line was the surge in employee expenditure. Given rising inflationary costs, this doesn’t bode well for the company.

Pointsbet share price snapshot

In the last year, the Pointsbet share price has sunk 78%, falling almost 40% in the past month.

In contrast, the ASX 200 has dropped just over 8% across the last year and is down 3% in the past month.

Pointsbet’s current market capitalisation is around $669 million.

The post Pointsbet share price closes lower after a tough day on the ASX appeared first on The Motley Fool Australia.

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Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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