Flutter Entertainment (NYSE: FLUT) received praise in a new report by Morningstar, highlighting the company’s strong capital allocation, in-house product development, and effective risk management strategies.
In today’s note, analyst Dan Wasiolek initiated coverage of the FanDuel parent company with a four-star rating (out of five) and set a fair value estimate of $250, indicating a potential upside of 18.4% from the current closing price.
«Flutter’s launch of a daily fantasy sports product in July 2009 gave it a first-mover advantage to capitalize on the 2018 Supreme Court ruling that legalized sports and iGaming betting in the US,» wrote Wasiolek. «As a result, Flutter now holds a dominant 40% share of digital revenue in the US.»
Flutter owns 95% of FanDuel, which, along with DraftKings (NASDAQ: DKNG), forms the US online sports betting (OSB) duopoly. However, their stock performances have diverged, with FanDuel’s parent company shares up nearly 18% year-to-date, while DraftKings has declined by 4.54%.
Flutter’s Global Operations Strengthen Investment Case
While FanDuel is a major brand in the US, many American bettors and investors may not realize that Flutter has substantial operations outside of the US. The Dublin-based company also owns well-known brands such as Betfair, Paddy Power, PokerStars, and Sisal, enabling it to capture significant market share in mature markets abroad.
«Beyond the US, Flutter’s decades of experience in product development and risk management have secured it top revenue shares, including 29% and 46% in the online gaming markets of the UK and Ireland (26% of 2023 sales) and Australia (12%), respectively,» added Wasiolek.
The analyst also noted that Flutter has successfully integrated its parlay offerings and technology stack into Sisal since acquiring the company in 2022, boosting its revenue share in Italy—Europe’s largest regulated gaming market after the UK and the Eurozone’s third-largest economy.
Flutter Succeeds Across Multiple Markets
At a time when smaller operators are struggling in the US OSB market, and some mid-sized competitors are failing to challenge FanDuel and DraftKings, Flutter is demonstrating its earnings strength both in the US and internationally. The company is achieving this while also expanding its EBITDA margins at an impressive rate.
“Flutter’s UK and Australian segments continue to maintain over 20% EBITDA margins, despite the stringent regulations and market maturity in these regions,” concluded Wasiolek. “Even with ESPN Bet’s aggressive entry into the US market in recent months, Flutter’s FanDuel brand has continued to gain market share and expand EBITDA margins.”
