Why is the PointsBet (ASX:PBH) share price sinking 13% today?

PointsBet shares are being slammed again…

| More on:
a man sits at a bar leaning sadly on his basketball wearing a US flag sticker on his cheekbone near a half drunk beer and looking despondent as though his basketball team has just lost a game.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • PointsBet shares have been sold off again on Wednesday.
  • This morning Goldman Sachs slashed its price target by almost a third.
  • This follows the de-rating of its US sports betting peers.

The PointsBet Holdings Ltd (ASX: PBH) share price is having another disappointing day.

In morning trade, the sports betting company's shares are down 13% to $3.62.

This means the PointsBet share price is now down by almost 50% since the start of the year and 75% over the last 12 months.

Why is the PointsBet share price sinking today?

Today's decline by the PointsBet share price appears to have been driven by a combination of weakness in the tech sector and the release of a broker note out of Goldman Sachs this morning.

In respect to the latter, Goldman has been one of PointsBet's biggest supporters over the last couple of years.

For example, when the broker initiated coverage on PointsBet in March 2021, it put a buy rating and $17.50 price target on the company's shares.

Unfortunately, since then, although the broker has continued to hold onto its buy rating, its price target has been moving lower and lower.

So much so, approximately two years after initiating coverage on PointsBet, this morning the broker retained its buy rating but slashed its price target by a further 32% to $6.74.

And while this price target continues to offer significant upside for investors, it appears as though the market is concerned that it will eventually be cut lower like previous targets.

Why has its price target been slashed?

Goldman explained that it made the move to reflect a de-rating of peer multiples and lower earnings estimates.

It commented: "Overall we have made some minor EBITDA changes across FY22-23E by -3/-2%, and larger 16% cuts in FY24 in account of further costs associated with planned state rollouts. Our MT to LT forecasts remain largely unchanged, premised on our house US$61 bn US TAM; however our 12-mo TP (SOTP based) falls to A$6.74 (from A$9.97 prior) driven by a MtM of peer multiples, consistent with our US Gaming revisions overnight."

"Given the significant multiple compression of high growth names and the OSB sector, we now value PBH's US business at maturity at 12.5x FY30 EV/EBITDA (discounted back at 10.4%, Cost of equity). Consistent with prior, we continue to apply a 5x discount to PBH's US franchise vs. our US team's revised DKNG 17.5x multiple," Goldman added.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns 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 Bruce Jackson.

More on Broker Notes

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Morgans says these ASX can rise 30% to 50%

The broker has good things to say about these shares.

Read more »

Two businessmen look out at the city from the top of a tall building.
Broker Notes

2 ASX REITs to buy in July: expert

Is it time to consider ASX REITs?

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Broker Notes

Broker tips 20% upside for these ASX utilities shares

Bell Potter sees upside in these two shares.

Read more »

A beautiful woman with brown hair and wearing bright red lipstick looks shocked as she holds her hand to her cheek in response to the crumbling Adore Beauty share price today
Broker Notes

3 ASX consumer sector shares to avoid in July: expert

If you're looking to buy ASX consumer shares in July, read on.

Read more »