On Tuesday, Citi updated its outlook on Flutter Entertainment Plc (FLTR:LN) (OTC: PDYPY), raising the share price target to £200.00 from £180.00, while reiterating a Buy rating on the stock. The revision follows Flutter's full-year 2023 results and its transition from International Financial Reporting Standards (IFRS) to United States Generally Accepted Accounting Principles (US GAAP).
The firm's analyst highlighted Flutter's strong year-to-date trading performance in the US, which led to an increase in revenue and EBITDA growth forecasts for 2024 and beyond. Citi now anticipates 2024 US revenues to surpass the company's guidance, estimating $6.3 billion compared to Flutter's projected range of $5.8 to $6.2 billion. This projection is supported by robust online sports betting stakes, expanding win margins, and continued momentum in iGaming.
The analyst also expects Flutter's 2024 US EBITDA to reach the higher end of the company's guidance, with Citi forecasting $778 million against the guided range of $635 to $785 million. Despite anticipated weakness in the Australian market, strong performance in the UK and Ireland is expected to largely compensate for this during 2024.
Looking further ahead, Citi extended its forecast horizon to 2028 from 2025, predicting substantial growth in the US market. The firm forecasts US revenues to reach $13.2 billion by 2028, representing a compound annual growth rate (CAGR) of 25% from 2023 to 2028. Additionally, US EBITDA is expected to hit $3.4 billion by 2028, accounting for approximately 60% of the group's EBITDA.
Finally, the analyst projected that Flutter Entertainment will achieve its target leverage ratio of 2.5 times by the end of the year. This financial position is believed to provide Flutter with sufficient flexibility for potential mergers and acquisitions or for returning cash to shareholders in the medium term.
InvestingPro Insights
With the recent update from Citi on Flutter Entertainment Plc's financial outlook, investors might also find the following metrics from InvestingPro insightful. The company's adjusted Price to Earnings (P/E) Ratio for the last twelve months as of Q1 2024 stands at a high 532.07, indicating a significant expectation of future earnings growth built into the current price. The PEG Ratio, which adjusts the P/E ratio for expected growth rates, is negative at -5.75, suggesting that analysts are forecasting a decline in earnings. Meanwhile, the Price to Book (P/B) ratio is 2.88, offering a glimpse into how the market values the company's net assets.
Operationally, Flutter's Operating Income Margin is at 3.23% for the same period, reflecting its profitability from core business activities. However, the Return on Assets (ROA) is slightly negative at -0.35%, indicating challenges in generating profit from its assets. Interestingly, the stock is trading at 98.5% of its 52-week high, showing investor confidence is near its peak. According to InvestingPro's Fair Value estimate of $95.09, the stock might be slightly overvalued at current levels.
InvestingPro Tips suggest that while Flutter's US market performance is strong, investors should consider the high P/E Ratio and negative PEG Ratio when evaluating the company's growth potential and stock value. For those looking to delve deeper, InvestingPro offers additional insights and tips – there are 7 more tips available on the platform to help guide your investment decisions. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.