Bullish indicating open at $55-$60, IPO prices at $37
On Thursday, Wells Fargo reiterated its Equal Weight rating on Flutter Entertainment (NYSE:FLUT) stock, maintaining a $224.00 price target. The firm highlighted Flutter Entertainment's strategic overview, which aligns with long-term financial targets and indicates potential for growth. Key performance indicators suggest a trajectory toward increased market dominance, particularly in the United States.
According to Wells Fargo, Flutter Entertainment's integrated approach, dubbed the Flutter Edge, which encompasses product development, technology, expertise, and scale, demonstrates the company's global dominance.
The analysis pointed to a higher structural hold in the US market and generous customer incentives as factors contributing to an expanding competitive moat for the company.
FanDuel, a subsidiary of Flutter Entertainment, is expected to achieve a long-term structural gross gaming revenue (GGR) hold of 16% by the fiscal year 2027, up from the last twelve months' 13%.
After accounting for promotional costs, which represent 4% of the handle and 25% of GGR, the net gaming revenue (NGR) margin is anticipated to be around 12%, comparable to the Australian market.
FanDuel's leading position is attributed to its superior product offerings, which result in a higher-than-average parlay mix and more legs per parlay, as well as better pricing strategies.
The report suggests that FanDuel's scale and promotional strategy will pose challenges for smaller competitors with lower hold and parlay mix, potentially leading to a further increase in market share.
Flutter Entertainment is expected to continue capturing a larger share of the online sports betting (OSB) market, with an active state NGR share projected to rise from 39% in FY21 to approximately 51%, while also optimizing its long-term EBITDA.
In other recent news, Flutter Entertainment has been the focus of various analysts, with MoffettNathanson raising the price target to $275, while BTIG and Barclays set targets at $249.00 and $263.00 respectively.
All firms maintained positive ratings, underlining the company's growth potential, especially outside the United States. Flutter Entertainment reported a 20% increase in Q2 revenue to $3,611 million and a 17% rise in adjusted EBITDA to £738 million.
The firm also confirmed its acquisition of Snaitech S.p.A., an Italian gaming operator, for approximately €2.3 billion ($2.53 billion), projected to conclude in Q2 2025.
Analysts suggest that Flutter's Italian operations could potentially double in size over the next four to five years, based on consistent market growth and shifts in market dynamics. These are recent developments in Flutter Entertainment's financial performance and strategic initiatives.
Barclays also highlighted the considerable total addressable market in Italy, which stands at €21 billion, with only a 21% online penetration rate, presenting a significant growth opportunity for Snaitech, which is expected to benefit from the projected expansion of Italy's digital market.
InvestingPro Insights
As Flutter Entertainment (NYSE:FLUT) continues to make strategic moves towards market dominance, particularly in the U.S., current real-time data from InvestingPro provides a deeper insight into the company's financial health and market performance. The company's market capitalization stands robust at $43.46 billion, reflecting investor confidence and a strong market presence. Despite not being profitable over the last twelve months, analysts predict the company will turn a profit this year, suggesting a potential upside for investors. This optimism is further buoyed by the company's solid revenue growth, which was 16.28% for the last twelve months as of Q2 2024.
Investors should note that Flutter Entertainment's stock has experienced a strong return over the last month, with a 14.95% increase, and an even more impressive three-month price total return of 32.51%. These figures are indicative of the company's growing momentum in the market. An InvestingPro Tip worth considering is the Relative Strength Index (RSI), which suggests that the stock is currently in overbought territory. This could imply that the stock's recent gains might prompt some investors to take profits, potentially leading to a short-term pullback.
For those seeking more comprehensive analysis and additional insights, there are over 10 InvestingPro Tips available, which include further evaluations of the company's debt levels, valuation multiples, and liquidity concerns. These tips can be accessed through InvestingPro's dedicated page for Flutter Entertainment at https://www.investing.com/pro/FLUT.
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