Afterpay: An interactive valuation
Introduction
PointsBet is an Australian-based betting platform that saw a tremendous price rise in 2020. We believe it still presents one of the best growth stories for 2021 for three key reasons:1) A proven strategy;
2) Growing share in infant, major market;
3) Exclusive partnership to fuel growth
Accompanied by visualisations and graphics to support our analysis, you will find a shallow dive into these reasons below.
A proven strategy
PointsBet entered the Australian-market at the beginning of 2017, establishing itself as the first and only corporate bookmaker in Australia to offer a proprietary spread-betting product known as ‘PointsBetting’
In the first half of FY21, PointsBet Australia achieved a turnover of just shy of $1.1bn a gross win of $136m AUD. The company looks poised to turnover more than 2bn for the full 2021 financial year.
These results have been achieved only three-years since entering the fixed odds market in Australia
The company now plans to recycle this strategy to establish itself in the US market
And so far, it's working - Pointsbet US is gaining scale even faster than in Australia. Following an initial downturn during COVID (where most US sports leagues were cancelled), Pointsbet US's Q2FY21 trading update was enourmous growing turnover from $164m to $655m between Q1 and Q2.
But the U.S market is complex and it's coming off a big change in regulation. Let take a deeper look.
Growing share in infant, major market
When thinking about PointsBet as an investment, it is cruicial to understand the American sports betting market
There was a complete prohibition on sports betting in the U.S until 2018
On May 14, 2018, the U.S Supreme Court found the federal law prohibiting states from authorizing sports betting to be unconstitutional. Since then, states can decide if they want to authorize and regulate sports betting in their state
This means that the market for sports betting in the U.S is really in its infancy
The dark grey on the map shows which states have legalized sports betting, while light grey indicates partial legalisation (e.g, sports betting is legal but run by the state lottery).
Dark green shows which states Pointsbet has launched in: New Jersey, Iowa, Indiana, Illinois, Colorado and Michigan.
With many more states likely to launch, we think further growth is inevitable for Pointsbet. But the company isn't just hoping new customers will discover them organically.
The company has secured a major partnership which looks likely to win them big market share as the U.S market undergoes it's transformation
Exclusive partnership to fuel growth
In 2020, PointsBet secured a five-year exclusive partnership with media corporation NBCUniversal Media (NBC).
Through the partnership PointsBet becomes the Official Sports Betting Partner of NBC Sports, giving PointBet exclusive game-day integration across the network as well as a committed marketing spend of $393m USD over the five-years. NBC recieves equity in Pointsbet in return.
With an estimated audience of viewers of 184M (the most of any sports network in the U.S) and a 100% reach across US households, the partnership with NBC Sports looks to be a truely transformational partnership
And as we pointed out earlier - the early signs have been great. In the most recent quarter Pointsbet grew turnover from $164m to $655m in the U.S
With most major sports leagues resumed throughout the U.S, we are very optimistic about the partnership and can see Pointsbet establishing themselves as a major player on the back of the deal
Summary
Pointsbet proved their business model here in Australia and has now positioned themselves to take major market share in the U.S as the prohibition on sports betting ends.With a partnership with the U.S's largest sports network secured - their recent quarterly paints a picture of a business ready to explode.
We see Pointsbet as one of the best growth plays in 2021 and will be watching closely.
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