Flutter Stock Could Double in 4 Years, Says Analyst
Flutter Entertainment (NYSE: FLUT) shares rose by 1% today following an analyst's assessment that the stock could more than double to $600 within the next four years. The gaming equity finished at $277.47 today.
In a client report, Macquarie analyst Chad Beynon began coverage of the parent company of FanDuel with an “outperform” rating and set a price target of $340, suggesting a potential upside of 22.8% from the current closing price. He observed that Flutter satisfies the "elusive" criteria for the software rule of 40, yet investors perceive the name as a gaming stock rather than a software equity.
"FLUT is a rare large-cap stock in the gaming and leisure sector that meets software’s elusive Rule of 40, yet does not trade like one,” wrote Beynon. “Based on Flutter’s current/pending assets, we see a clear line of path for six-year (2024E-30E) revenue/earnings before interest, taxes, depreciation, and amortization (EBITDA) compound annual growth rates (CAGRs) of +12%/21%, fueled by an unrivaled SAM (serviceable addressable market) with a +10% CAGR to $210bn by 2030 and market share gains. If this path is executed on, our calculations show a potential ~$600 share price in a four-year time frame.”
In the software sector, the rule of 40 states that a software-as-a-service (SaaS) vendor ought to achieve a total revenue growth and profit margin percentage of 40%. SaaS is broadly utilized by numerous cloud computing firms.
Flutter's Stock Possesses Strong Competitive Advantages
Beynon noted that Flutter qualifies as a wide moat stock, signifying it possesses advantages like impressive brand recognition and strong intellectual property (IP) that rival companies struggle to compete with.
“FLUT benefits from a deep moat (i.e., unique IP, high switching costs, brand loyalty), creating significant barriers to entry. The potential for inorganic growth through strategic mergers and acquisitions and partnerships offer upside not in our forecast,” observed the analyst . “Thus, we believe FLUT is undervalued relative to its intrinsic worth, future growth prospects, and S&P 500 peers.”
The broad evaluation is precise as FanDuel ranks among the most valuable gaming brands globally, and in the US, it is part of an online sports betting duopoly alongside DraftKings (NASDAQ: DKNG), which is the other participant.
Although FanDuel faces numerous competitors, it usually places at or near the top in several bettor surveys related to technology and performs well in brand loyalty, suggesting that customers are “sticky” and tend to come back after leaving. FanDuel's competitive advantage is reinforced by its extensive offerings and technological dominance in same-game parlays, which attract bettors and are very lucrative for operators.
Flutter Acquisitions May Enhance Stock Value
American investors frequently see Flutter primarily in relation to FanDuel, yet the truth is that the company possesses numerous other brands that hold significant market share in regions like Australia and Europe.
Dublin's Flutter attained its leading position via a continuous array of strategic acquisitions, and although the firm often garners attention for its deal-making, investors might not be fully acknowledging the value of those acquisitions reflected in the share price.
“Since 2019, FLUT shares have seen a 23% CAGR (vs S&P 500 +16%), attributable to its major leading positions in current (US, UK/Ireland, Australia) and pending (Italy, Brazil) markets, achieved by its proven and replicable M&A strategy (‘Flutter Edge’),” concludes Beynon. “We estimate nine acquisitions since 2019 have created ~$200 of incremental per share value for investors with a long runway from secular trends of digitization and legalization.”
