Flutter Entertainment (NYSE: FLUT) has faced recent headwinds, shedding 7.56% over the past month. The dip followed the company’s announcement that customer-friendly outcomes during the NFL season would impact its Q4 2023 and 2024 results. However, analysts remain optimistic about the stock’s potential.
Stifel Analyst Initiates Coverage with “Buy” Rating
Stifel analyst Jeffrey Stantial initiated coverage on Flutter with a “buy” rating and a 12-month price target of $320, representing a potential upside of 24.2% from the current closing price. This exceeds the consensus price forecast of $306.85.
Stantial highlighted several key factors bolstering Flutter’s prospects:
- Market Leadership: Resilient dominance in the U.S. market, driven by strong user acquisition, effective monetization, and margin expansion.
- Global Reach: Leadership in major markets, including Australia, the UK, and the U.S.
- Mature Market Growth: Structural improvements in international markets, with an industry shift toward recreational users and enhanced product offerings.
Global Dominance in Sports Betting
The Irish gaming giant, which owns 95% of FanDuel, the largest online sportsbook operator in the U.S., operates in over 100 countries. Its established leadership in key markets further cements its position as a global powerhouse in sports wagering.
Robust Free Cash Flow and Shareholder Rewards
Wall Street’s bullish outlook on Flutter is underpinned by its strong balance sheet and free cash flow (FCF) growth potential. The company is targeting a multi-year FCF growth of approximately 56% CAGR from 2024 to 2027, driven by:
Expansion into new markets.
Scale-driven efficiencies.
A $5 billion stock buyback plan, including $350 million in share repurchases this quarter.
Flutter has also demonstrated a track record of strategic acquisitions, enhancing its compound annual growth rate (CAGR) and competitive position.
S&P 500 Inclusion Could Be a Game-Changer
Stantial identified the potential inclusion of Flutter in the S&P 500 as a significant near-term catalyst. By shifting its primary listing to New York from London in 2023, Flutter meets the profitability criteria for the index. Joining the S&P 500 could prompt substantial buying activity from index funds and active managers, further boosting the stock’s appeal.
This milestone would also give Flutter an edge over its competitor DraftKings (NASDAQ: DKNG), which appears less likely to achieve this benchmark first.
Balancing Risks and Rewards
While Flutter is not without risks—such as intense competition and the potential for higher state-level sports wagering taxes—the company’s growth prospects and valuation remain compelling. Stantial emphasized Flutter’s attractive valuation compared to other internet stocks, supported by its market growth and competitive advantages.
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