Analysts say Flutter stock sell-off is exaggerated, potential catalyst for U.S. listing
Flutter Entertainment (OTC: PDYPY ) shares have gained 13.77% year to date. But gaming stocks have fallen into a bear market over the past six months. At least one analyst said the rejection was overblown and the stock faces positive catalysts going forward.
In a note to clients on Monday, HSBC analyst Joseph Thomas reiterated a buy rating on the FanDuel parent company with a price target of 25% upside from current levels. Thomas noted that Flutter's valuation is attractive, with projected 2025 enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) of 16 times and a free cash flow yield of 7%.
For a group that can continue to grow well, it doesn't seem expensive to us as it resolves some one-off issues," Thomas said.
These one-off issues include weakness in Australia, FX headwinds, good luck for punters in the third quarter and some regulatory and tax issues in the UK. Flutter's rivals are also hurt by weak regulatory barriers in Australia and the UK.
U.S. Full of Catalysts for Flutter Stock
Flutter is the world's largest online gaming company, headquartered in Dublin and one of the major operators in the UK and European gambling scene. In recent years, FanDuel's 95% ownership has made it more of an American story.
FanDuel, along with DraftKings (NASDAQ: DKNG ), is part of a de facto duopoly in the U.S. online sports betting market and an emerging force in the country's iGaming scene. FanDuel held 40% of the U.S. online sports betting market as of the end of the third quarter, compared with 42% a year ago. Its iGaming stake rose from 19% to 23%, and Flutter is capitalizing on the momentum with plans to list on the New York Stock Exchange (NYSE) in the first quarter of 2024.
This isn't new news. However, HSBC's Thomas noted that most of Flutter's enterprise value is currently attributable to the operator's U.S. unit, which is growing faster than other markets in which the company operates.
Crucially, FanDuel is on track to achieve annual profitability this year, meaning it will be the first U.S. internet sportsbook to achieve such a feat. FanDuel only needs to meet previously announced forecasts to boost Flutter stock, Thomas added.
Flutter’s US IPO could make sense
Although Flutter's plans to list in New York have been in the works for about ten months, confirming that the news is already widely known to the investing public, the move could still have an impact on the stock.
Flutter's shares trade over-the-counter in the United States, limiting fund managers' ability to buy the stock. Likewise, many private investors avoid buying names that aren't traded on a major exchange.
In other words, listing on the NYSE could significantly expand Flutter stock's audience while making it easier for operators to efficiently raise capital when needed.
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Source: www.casino.org
