Flutter Entertainment Shares Offer Opportunity, Says Analyst

Home » Flutter Entertainment Shares Offer Opportunity, Says Analyst

Posted on: March 16, 2022, 11:46h. 

Last updated on: March 16, 2022, 11:46h.

Like its peers in the gaming equity complex, Flutter Entertainment (OTC:PDYPY) stock has been drubbed in recent months, but at least one analyst says the FanDuel parent remains a compelling avenue for investors looking to tap into the fast-growing US internet casino and sports wagering markets.

Flutter Entertainment
Flutter Entertainment CEO Peter Jackson. An analyst is bullish on the gaming company’s shares. (Image: The Irish Times)

In a note to clients today, CBRE analyst John DeCree reiterates a “buy” rating on Flutter, though he pared some estimates on the gaming company. His constructive comments arrive as the stock is off 24 percent year-to-date.

The analyst notes that Flutter’s US opportunity set, which largely centers around FanDuel, may not be fully appreciated by investors due in part to the recent slump by rival DraftKings (NASDAQ:DKNG).

While DKNG has been the valuation benchmark for the sector as the only large cap pure-play on US sports betting, we believe FanDuel should trade at a premium given its leading market share, clearer path to profitability, and ability to self-fund growth,” says DeCree.

DraftKings is off 41.28 percent year-to-date, a slide that’s depressing sentiment across the sports betting equity landscape.

Waiting on FanDuel Spin-off

Previously, a significant portion of the momentum ascribed to Flutter stock was a well-publicized plan to spinoff FanDuel, which is by far the largest online sportsbook operator in the US.

That effort encountered headwinds last year amid a marquee executive departure and Fox Corp. (NASDAQ:FOXA) suing Flutter regarding the price at which the former can acquire an 18.6 percent in interest in FanDuel.

Flutter wants what it believes is fair market value, while Fox wants the price the parent company paid — $4.175 billion in December 2020 — when it bought out investment firm Fastball’s 37.2 percent interest in FanDuel.

It’s believed Fox’s litigation, which is taking place in a New York arbitration court, could be resolved this year, setting the stage for Flutter to sell shares of FanDuel to the public. April marks the one-year anniversary of Fox bringing the suit against Flutter.

Flutter Has Good Reason to Spinoff FanDuel

According to DeCree’s math, Flutter has compelling reasons to move forward with a FanDuel spin-off.

“Assuming a 4x multiple of FY23 revenue, we estimate FanDuel is worth roughly £54/share. This valuation implies the rest of the business is trading at 7.2x F23 EBITDA,” says the analyst. “An even more conservative valuation of FanDuel based on 2.5x FY23 revenue would imply the core business is trading at 9.5x FY23 EBITDA, which is still undemanding.”

If his £54 per share estimate on FanDuel is accurate, that’s about $70.40 based on current exchange rates, or more than quadruple where DraftKings trades.

Flutter could use the capital from a FanDuel transaction for acquisitions in other markets, something the company’s shown a willingness to do. The UK-based firm is one of the largest sports operators in Europe and Australia, among other markets.

Leave a Reply

Your email address will not be published. Required fields are marked *

New Casinos
Stars Casino: Get $100 bonus cash + 200 bonus spins
Ocean Casino: 200% match bonus up to $500 + 20 bonus spins
1 Free Spin credited for every $1 deposit. Up to $100 + 100 Spins
Monte Casino: Get 10 no deposit spins + $100 Bonus
Claim a 100% deposit bonus up to $250 + free spins