Flutter Selloff Could Become Buying Opportunity

Similar to other gaming stocks, Flutter Entertainment (NYSE: FLUT) is facing significant declines in a selloff driven by tariffs that's affecting US equities. The penalty persisted on Monday as shares of the FanDuel parent ended the day down by 8.36%, though some analysts continue to be optimistic about the gaming brand. 

In a recent report, Morningstar analyst Dan Wasiolek emphasizes Flutter's extensive product range, impressive brand visibility, and advanced technology as key elements supporting the investment thesis — one that may become attractive as the stock has fallen by 15% year-to-date.

"In the US, Flutter has extended its leading daily fantasy sports position, first established in 2009, into the top position in the US sports betting and iGaming market, with the company holding 36% revenue share in the states where it is active,” observes Wasiolek.

Flutter’s leading position in the US is due to its 95% control of FanDuel. In terms of market share, FanDuel is the leading online casino and sports betting operator in the United States. 

Flutter's Fantastic Financial Support Forecast 

When it announced its fourth-quarter results last week, Flutter highlighted that it ended 2024 with $1.53 billion in cash and cash equivalents along with $48 million in restricted cash, while informing investors that its leverage ratio fell to 2.2x from 3.1x at the conclusion of 2023. 

For this year, the operator anticipates over $650 million in cash flow generated from operating activities. That cash flow enables Flutter's share buyback efforts, which are anticipated to total $350 million this quarter, rise to $300 million in the second quarter, and potentially reach $1 billion this year. 

“The healthy balance sheet should allow the company to invest behind its business organically and through acquisitions, which we see as a good allocation of capital, given the attractive industry growth opportunity,” adds Wasiolek. “We would view share repurchases as a good allocation of capital only if below our intrinsic value. We model a total of about $6 billion in share repurchases over the next four years.”

If that $6 billion is confirmed, it would represent a 20% increase over the $5 billion share repurchase plan revealed by the owner of Paddy Power last year. 

Flutter Stock Trading at Significant Discount 

US investors largely see Flutter as the parent company of FanDuel, which is a correct interpretation and clarifies the firm's choice to relocate its main listing to New York. 

Nonetheless, that perspective overlooks the operator's dominant standings in markets like Australia, continental Europe, and the UK — a characteristic absent in many of its competitors focused on domestic markets. Additionally, the stock now seems appealing in terms of valuation. 

“After reviewing Flutter’s fourth-quarter results, we have increased our fair value estimate to $279 per share from $275 for the time value of money. Our valuation implies a 16 times 2025 enterprise value/adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple,” concludes Wasiolek.

That valuation estimate suggests a potential increase of 22.6% from the current closing price.