Some stocks that have helped investors cash-in the bets: PointsBet, Sezzle

  • Jul 31, 2020 AEST
  • Team Kalkine
Some stocks that have helped investors cash-in the bets: PointsBet, Sezzle

Summary

  • The uncertain trajectory of shares during the unprecedented COVID-19 induced economy has given many investors to cash-in the bets.
  • Pointsbet, an online bookmaker, experienced a price rally of 104.15% in a year with its Australian business gaining robust growth due to preference for racing over sports
  • Share price of Sezzle, a “buy now, pay Later” company, gained 211.36% annually, as customers preference changed to eCommerce shopping during COVID-19 times

While the government is busy running job reform programs to induce liquidity in the hands of the common man, few stocks that have gained unprecedented growth during the COVID-19, have given many investors opportunity to rake in mullahs. In today’s article, we are featuring two stocks that have gone against gravity in the current bearish share market.

Pointsbet Holdings Ltd (ASX: PBH)

Pointsbet is an online bookmaker that offers products facilitating betting on sports, including horse racing. The company operates in Australia and the United States. On 28 July 2020, Pointsbet announced strong Annual and Q4 results that drove the share price to one month high of A$6.54 during the trading day. In contract, on 31 July 2020, the company further announced the good news of receiving Master Sports Wagering Licence by its partner Hawthorne Race Course Inc., to kick start online and retail sports betting in Illinois. The stock of PHB is trading at A$5.935, up by 0.935% (AEST: 12:26 pm) on 31 July 2020.

Annual Update

The Australian Trading business generated a record A$830.5 turnover in FY20, an increase of 69.5% previous corresponding period (pcp). Net Win was A$75.1 million, demonstrating a 159.4% increase over previous year. Net win margin was recorded at 9.0%.

The US Trading business generated A$321.1 turnover in FY20. Net Win was A$7.0 million with Net win margin recorded at 2.2%.

Quarter Update

Overall turnover in Q4 was reported at A$349.4 million, an increase of 58% from A$221.3 million of Q4 FY19. Australian Business contributed A$302.9 million, an uptick of 80% over pcp.  The US trading business recorded A$46.5 million turnover, demonstrating a 13% decrease over PCP.

Robust growth in Australian Trading business

The company’s robust quarterly performance highlighted its Australian Trading business experiencing a growth of 109% quarter-on-quarter basis, backed by encouraging results and increased preference for racing from sports.

The Australian Trading business generated a record quarterly Net Win of A$32.4 million, an uptick of 330%, with a positive EBITDA recorded on consecutive Q3 and Q4 of FY20. Active clients in Australia increased to 90,422 in Q4 FY20 from 68,464 in Q4 FY19.

Massive success of Tier 1 Channel 7 Australian horse racing partnership and Fox Sports AFL partnership also fostered growth in the Australian business. The Fox Sports AFL partnership was to become the media provider’s AFL betting partner. According to Pointsbet, this was part of ‘an opportunistic approach to targeting media assets to deliver efficient client acquisition and increased betting volumes’.

US trading Business showcases mild success

The US Trading business reported a Net Win of A$1.2 million in Q4 FY20. The business was badly impacted due to sports events cancelation and absence of all 4 major US sporting leagues. The US trading business demonstrates successful client engagement and strategically step taken towards offering non-traditional sports wagering markets amid a COVID-19 impacted sports industry. The Company also got appointed as an official betting partner of the Detroit Tigers (MLB) and secured 8.7% in New Jersey to handle online market share in Q4 FY20.

How Pointsbet is positioned?

Pointsbet is well positioned to continue enjoying the sports industry consolidation and shifting of consumers behaviour towards online. The Company shall continue its investment in iGaming and execute its US strategy. As PBH has continued to maintain client engagement, despite COVID side effects, it is well placed to re-start the major sporting events across the US.

Sezzle Inc (ASX: SZL)

Sezzle is a “buy now, pay Later” company, headquartered in the United States, has its operations in the US and Canada. The company currently serves around 1.4 million active customers with more than 16k merchants.  The business model is very similar to other BNPL players. The business has gained traction during the lockdown period, leveraging consumer preference for eCommerce shopping.

Agreement with Plaid to secure payment through the Automated Clearing House system

On 28 July, Sezzle signed an agreement with Plaid that will enable Sezzle customers to link their bank account with Sezzle platform using Plaid’s data network tools. The Plaid network will allow Sezzle to secure payments through the Automated Clearing House system (ACH).

2nd Quarter Update

Source: Company ASX Update

Source: Company ASX Update

The last quarter i.e. Q2 FY20 ending 30 June 2020 recorded the best quarterly performance by Sezzle with underlying merchant sales (UMS) demonstrating 57.5% increase QoQ, and more than 348% increase YoY.

Other highlights include:

  • Merchant Fees increased by 54.8% QoQ and 397% YoY
  • Active Consumers increased by 325,990 in 2Q20
  • Active Merchant increased by 3,397 in the quarter
  • The company reported positive net Operating Cash flows of US$4.3 million in Q2 FY20
  • US$169.35 million of Customers receipts recorded in Q2 FY20
  • US$154.26 million Cash Payment was made to Merchants in Q2 FY20, an increase of 49.2% QoQ
  • The company also reported net cash and cash equivalents of US$55.7 million which comprised a bank balance of US$52.8 million and US$2.9 million restricted cash.

How Sezzle is positioned?

Sezzle has a strong customer and Merchant base and poses as a competitor to Afterpay Limited (ASX:APT) in the US market. The company serves the Canada market, where Afterpay is yet to venture in.

Since last year, the SZL share price has gone up by 211.36%, hitting A$6.8 on 31 July 2020, a decrease of 0.73% from previous close.

 


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