On Monday, BTIG maintained its Buy rating on Flutter Entertainment (NYSE:FLUT) and increased the stock's price target to $305.00, up from the previous $249.00. The firm anticipates a positive outlook for the company ahead of its third-quarter earnings report scheduled for Tuesday evening, citing healthier third-quarter data and manageable long-term risks.
The firm's analysis suggests that despite Flutter's shares remaining relatively unchanged since the company's Capital Markets Day (CMD) in September, the fundamentals have improved, particularly with the second half of 2024 in view. The firm believes that the market has not fully appreciated the healthier fundamental outlook and improving expectations for the latter half of the year.
BTIG's report reflects adjustments to estimates for the United States and the United Kingdom (TADAWUL:4280) for the third quarter, while also considering the impact of heavier October NFL results on the fourth-quarter estimates for the U.S. market. The guidance provided during the September CMD has been factored into the medium-term estimates for both the U.S. and international markets, aiming to align them more closely with the company's guidance.
The firm draws parallels between Flutter's current situation and the recent earnings report from DraftKings (NASDAQ:DKNG), suggesting that investors may look beyond short-term headwinds to a more favorable fundamental setup and valuation over a one to two-year horizon. The report also notes Flutter's trading update in early January, which shifted the focus to the company's longer-term prospects.
Looking forward, BTIG sees Flutter's shares as undervalued, trading below the industry average on a blended EBITDA basis for 2025 and 2026, despite the company targeting $2.5 billion in free cash flow by 2027 and planning a significant buyback program of up to $5 billion over the next three years. The firm's estimates for Flutter incorporate a conservative view, including a substantial deceleration in U.S. handle growth and excluding Betnacional numbers due to uncertainties around the legal market launch in Brazil.
In conclusion, BTIG positions Flutter Entertainment as a Top Pick, with the expectation that the company's financial performance and strategic initiatives will yield enhanced returns for shareholders and potentially lead to a reevaluation of the stock based on free cash flow per share, which is currently trading at approximately 17 times against the firm's 2027 estimate with an approximate 6% yield.
In other recent news, Flutter Entertainment is making waves in the financial sector with a series of significant developments. The company reported a robust Q2 performance with a 20% increase in revenue to $3,611 million and a 17% rise in adjusted EBITDA to £738 million. Additionally, Flutter Entertainment confirmed its acquisition of Italian gaming operator Snaitech S.p.A. for approximately €2.3 billion ($2.53 billion), which is expected to finalize in Q2 2025.
Furthermore, the company has applied for a block listing of shares and disclosed an update on its total voting rights. UBS has initiated coverage on Flutter Entertainment, assigning a Buy rating and setting a price target of $306.00. UBS predicts a 24% year-over-year increase in group revenue and expects a 3% top-line beat, attributing the growth to strong performances in both the U.S. and rest of world segments.
Several analyst firms have offered their assessments of these developments. Benchmark reiterated its Buy rating on Flutter Entertainment, viewing the recent pullback as an opportunity. Barclays (LON:BARC) maintained an Overweight rating on the company with a price target of $275. Susquehanna increased its price target for Flutter Entertainment, highlighting the company's growth potential and pending acquisitions in Italy and Brazil.
InvestingPro Insights
Flutter Entertainment's recent performance aligns with BTIG's optimistic outlook. According to InvestingPro data, the company has shown strong returns across multiple timeframes, with a 66.96% price total return over the past year and a 29.19% return in the last three months. This performance supports BTIG's view that Flutter's shares may be undervalued relative to its potential.
The company's revenue growth is also noteworthy, with a 20.33% increase in the most recent quarter and a 16.28% growth over the last twelve months, reaching $12.88 billion. This growth trajectory supports BTIG's expectation of improved fundamentals and a positive outlook for the latter half of 2024.
InvestingPro Tips highlight that net income is expected to grow this year, and analysts predict the company will be profitable this year, aligning with BTIG's optimistic stance. Additionally, the tip indicating that Flutter operates with a moderate level of debt could be seen as a positive factor in the company's financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Flutter Entertainment, providing a deeper understanding of the company's financial position and market performance.
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