After so many days to forget in 2022, the PointsBet Holdings Ltd (ASX: PBH) share price finally had a day to remember on Monday.
The sports betting company’s shares jumped over 18% to $2.55.
This followed news that SIG Sports Investment Corp (SIG) has injected $94.16 million into PointsBet through a placement of shares at a premium of $2.43 per share.
What has been the reaction?
Analysts at Goldman Sachs have been looking over the deal and appear to see long-term positives from it. They also note that the cash injection should remove any balance sheet or cash burn concerns.
While we make no earnings changes as we await completion of the placement (on or around June 23), on balance we see strategic merit in today’s events for PBH given the addition of a long-term strategic investor (with voluntary lock up period) to its register and the potential operating upside from further widening its margin/tech gap to peers through its partnership with Nellie Analytics.
Additionally, this should now allay any market concerns around PBH’s balance sheet/cash burn profile. We note the placement represents a premium to the 5-day VWAP and there continues to be M&A interest in PBH.
Outside this, the broker advised that its research indicates that industry marketing activities in the United States have been rationalising. Which, once again, should ease cash burn concerns.
Finally we note the feedback from our recent Americas Leisure conference continues to point to a rational US OSB marketing environment, with peers recently reiterating LT targets (between mid to high teen EBITDA margins to as high as 37%) and still strong demand despite the reopening. Looking ahead we continue to expect a further 4 state launches in the US by PBH this CY, bringing exposure to 14 states plus Ontario.
Is the PointsBet share price good value?
Despite yesterday’s strong gain, Goldman Sachs believes the PointsBet share price can still double from current levels over the next 12 months.
Its analysts have a buy rating and $5.78 price target on the company’s shares. This implies potential upside of 126% for investors.
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