JPMorgan says little-known West Virginia fintech is positioned as 'bank of choice' for online gaming

Published Mon, Feb 27 202311:19 AM ESTUpdated Mon, Feb 27 202312:26 PM EST

JPMorgan says a little-known microcap financial holding company that began as a West Virginia community bank but is transitioning into a fintech is poised to become "the Silicon Valley Bank" of the online gaming industry. Analyst Steven Alexopoulos initiated research coverage of MVB Financial with an overweight rating, citing its position as the top bank in the online sports betting and gaming industries. MVB Financial, with a market value of a little more than $330 million, is headquartered in Fairmont, West Virginia, population 18,000, about 70 miles south of Pittsburgh. Yet MVB, headed by CEO Larry Mazza, currently holds an 85% market share in banking for online gaming. "Combining a strong management team with an intense focus on serving underserved niche markets with significant growth prospects, MVB has transformed its deposit franchise," Alexopoulos wrote in a client note on Monday. JPMorgan is bullish on MVB as more states legalize online sports betting and additional growth levers come from providing banking services to the industry. Alexopoulos assigned a $35 price target on MVB shares, implying a 40% upside from its closing price on Friday. But the stock rallied as much as 10.2% in early trading Monday. MVBF 1Y mountain MVB Financial in past year MVB is uniquely positioned among its competitors, according to the note, thanks to Mazza's co-ownership of the website ProFootballTalk. "With CEO Mazza's co-ownership of ProFootballTalk converging with an ambition to bank fintechs, this has resulted in MVB going all-in (as the first mover) on this 'blue ocean' opportunity to become the bank of choice for online sports betting and online gaming operators," said Alexopoulos. ProFootballTalk.com "is a key content provider for NBC Sports," according to MVB's website. JPMorgan anticipates MVB emerging as a "long-term winner" that will outpace its competitors in revenue, earnings per share and tangible book value. "Over time, we see MVB as becoming 'the Silicon Valley Bank' of the online gaming industry," JPMorgan wrote. "Just as Silicon Valley Bank is the hub that connects the players in the innovation economy, we see MVB establishing a first mover position with players across the online gaming industry including the operators, technology providers, alternative online gambling providers, as well as media partners." Online gamblers depositing funds into accounts at FanDuel and DraftKings ultimately see those monies end up on MVB's balance sheet, JPMorgan said. MVB now has more than $900 million in online gaming deposits, accounting for 31% of total deposits. As a result, approximately 50% of MVB's deposits don't bear interest today, up from about 10% as recently as 2017, the bank said. What's more, MVB Bank also provides banking services to support Credit Karma Money Spend and Save accounts. Credit Karma is a unit of Intuit . MVB shares are now up about 23% in 2023 after sliding 47% in 2022. Disclosure: CNBC is owned by Comcast's NBCUniversal. —CNBC's Michael Bloom contributed to this report.