The PointsBet Holdings Ltd (ASX: PBH) share price has started the week on a very disappointing note.
In afternoon trade, the sports betting company's shares are down 11% to a new 52-week low of $3.99.
This means the PointsBet share price is now down 44% since the start of the year.
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Why is the PointsBet share price sinking again?
The weakness in the PointsBet share price on Monday has been caused by an update from one of the company's biggest rivals.
On Friday, Nasdaq-listed sports betting giant, DraftKings, released its quarterly update. And as you might have guessed, this update did not go down well with the market. In fact, the DraftKings share price crashed 22% on Friday night and hit a 52-week low of its own.
DraftKings revealed that it made a massive loss of US$326 million during the fourth quarter of FY 2021. And unfortunately, these losses aren't expected to end any time soon. The company advised that it expects to post a loss of ~US$1 billion in FY 2022.
These losses are largely being driven by customer acquisition costs. This has many in the market questioning the long-term profitability of sports betting companies.
And while PointsBet finished the second quarter with a cash balance of A$523.3 million, investors may be wondering how long that will last if it wants to keep up with the likes of DraftKings.
Is this a buying opportunity?
While it is never a good idea to catch a falling knife, the team at Goldman Sachs sees a lot of value in the PointsBet share price.
At the end of January, the broker retained its buy rating with a $9.97 price target. This is more than double where its shares trade at today.
Goldman appears optimistic the company can navigate successfully through the difficult operating environment.
It said: "In our view, the company has been able to thus far execute on the balancing act of juggling the forces of handle share, marketing promotional activity and margins. We think this highlights the strong foundation of its US franchise, underpinned by its leading proprietary tech stack and product offering."
