HSBC Analyst Thomas Criticizes Harsh Punishment for Flutter Stock

Flutter Entertainment Stock Sees Sell-Off, Analyst Sees Rally Potential

Shares of Flutter Entertainment (OTC: PDYPY) have seen a 13.77% increase year to date, although the gaming equity has entered a bear market over the past six months. Despite this, one analyst believes that the sell-off is overdone and that there are positive catalysts on the horizon for the stock.

HSBC analyst Joseph Thomas reiterated a “buy” rating on the parent company of FanDuel, setting a price target that suggests a 25% upside from current levels. Thomas argues that Flutter is attractively valued, trading at an estimated 16x 2025 enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), and with a free cash flow yield of 7%.

Thomas stated, “That doesn’t strike us as being expensive for a group that can continue to deliver good growth as it absorbs some of the one-off issues.”

These one-off issues include softness in Australia, foreign currency headwinds, favorable results for bettors in the third quarter, and regulatory and tax issues in the UK. Flutter’s rivals have also faced challenges due to similar issues in Australia and UK regulatory hurdles.

Flutter, based in Dublin, is the world’s largest online gaming company and has a strong presence in the UK and European wagering markets. With a 95% ownership of FanDuel, the company has become a significant player in the U.S. online sports betting market.

Along with DraftKings (NASDAQ: DKNG), FanDuel is part of a de facto duopoly in the U.S. online sports betting market and is a rising competitor in the iGaming space in the country. FanDuel had a 40% share of the U.S. online sports wagering market at the end of the third quarter, with its iGaming share increasing to 23%. Flutter plans to list on the New York Stock Exchange (NYSE) in the first quarter of 2024.

HSBC’s Thomas noted that most of Flutter’s enterprise value is currently attributable to the operator’s U.S. arm, which is delivering more rapid growth than other markets. FanDuel is on track for annual profitability this year, making it the first U.S. internet sportsbook operator to achieve this milestone. Thomas believes that FanDuel meeting previously disclosed forecasts could spark a rally in Flutter stock.

While Flutter’s plans to list on the NYSE have been widely available for about 10 months, the move could prove significant for the stock. Currently trading over-the-counter in the U.S., a NYSE listing could broaden Flutter’s stock audience and make it easier for the company to raise capital efficiently.