Flutter Entertainment (NYSE: FLUT) won kudos in new coverage by Morningstar, with the research firm lauding the gaming company’s capital allocation, in-house product development, and risk management assets, among other points.
In a note out on Tuesday, analyst Dan Wasiolek initiated coverage of the FanDuel parent with a four-star rating (five is the highest) and a fair value estimate of $250. That implies potential upside of 18.4% from Tuesday’s closing price.
Flutter’s construction of a daily fantasy sports product in July 2009 provided a first-mover lead to take advantage of a 2018 Supreme Court ruling that allowed for legalized sports and iGaming wagering in the US. As a result, Flutter holds a commanding 40% digital revenue share in the US,” wrote Wasiolek.
Flutter owns 95% of FanDuel, which is half of the US online sports betting (OSB) duopoly, with DraftKings (NASDAQ: DKNG) representing the other half. While the two companies are often joined at the hip, their share price performance hasn’t been in lockstep. Year to date, shares of the FanDuel owner are up nearly 18% while DraftKings is lower by 4.54%.
Flutter’s Non-US Operations Help Stock’s Case
The FanDuel brand is one of the most valuable in the gaming industry and highly recognizable to US daily fantasy sports (DFS) participants and sports bettors. Even so, many American bettors and some investors don’t know that Flutter has significant operations outside of this country.
In addition to FanDuel, the Dublin-based company controls well-known brands including Betfair, Paddy Power, PokerStars, and Sisal, among others. That portfolio has enabled the operator to capture significant share in mature markets outside the US.
Outside the US, Flutter’s decades of expertise in product development and risk management have also led to top revenue share. “The company holds 29% and 46% online gaming revenue share in its most mature markets of UK and Ireland (26% of 2023 sales) and Australia (12%), respectively,” added Wasiolek.
The analyst pointed out that Flutter has smartly integrated its parlay offerings and tech stack into Sisal since acquiring that firm in 2022, allowing it to increase revenue share in Italy. Italy is an important market for Flutter because it’s the Eurozone’s third-largest economy and Europe’s largest regulated gaming market after the UK.
Flutter Thriving in Multiple Countries
At a time when smaller operators are frequently waving the white flag in the US OSB space, and some midsized players are failing to grab share from FanDuel and DraftKings, Flutter is asserting earnings prowess in this country and others.
It’s doing so in such a way that earnings before interest, taxes, depreciation, and amortization (EBITDA) margins are expanding at an impressive pace.
“The company’s UK and Australian segments still see over 20% EBITDA margins, despite stringent regulation and industry maturation in these regions,” concluded Wasiolek. “ESPN Bet’s aggressive entry into the US market in the past several months has not prevented share gains or expanding EBITDA margins at Flutter’s FanDuel brand.”
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