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Key points
- PointsBet shares have fallen heavily over the last 12 months
- Goldman Sachs believes this has created a buying opportunity
- The broker's price target implies potential upside of over 80%
The PointsBet Holdings Ltd (ASX: PBH) share price could be a bargain buy after recent weakness.
That's the view of one of Australia's leading brokers, which has reiterated its buy rating on Monday morning.
Why is the PointsBet share price a bargain buy?
According to a note out of Goldman Sachs, its analysts have reiterated their buy rating with a trimmed price target of $11.00.
Based on the current PointsBet share price of $6.05, this implies potential upside of 82% over the next 12 months.
Goldman believes that the company's shares could rerate to higher multiples this year, particularly given the transformational year that it has ahead of it.
What did the broker say?
Goldman feels the weakness in the PointsBet share price has created a buying opportunity for investors.
It commented: "Online sports-betting stocks significantly sold off in CY21, particularly US listed peers, which we believe can be attributed to: i) concerns around competition and sustainability of the sector, ii) generally slower-than-expected new state openings, and iii) market inflation concerns and rotation from these high-growth names. That said, we see this as an attractive entry point for PBH given the lowered expectations and transformational year ahead wherein it is targeting a tripling of North American state exposures."
"In our view CY22 will be a transformational year for PBH, given a confluence of some US states maturing, rationality playing out between competitors, potentially consolidation across the industry as well as PBH's target of almost tripling its North American state exposure from the 8 currently operational in Q2FY22E. Some of the next states set to be announced will include New York where PBH already had success in previous tenders, Ontario Canada, Pennsylvania, Maryland, Tennessee and Louisiana," the broker added.
Looking ahead, Goldman is expecting PointsBet's second quarter update later this month to "continue to highlight strong momentum across its domestic franchise." The broker expects the company to be "firmly 4th place in terms of market share across digital wagering domestically noting its target of 10% share by 2025 (~4% now)."
