By John Jackson 
Flutter Entertainment (NYSE: FLUT) shed 7.56% over the past month after the FanDuel parent told investors its fourth-quarter and 2024 results would be hampered by customer-friendly outcomes during the NFL season, but analysts remain bullish on the stock.
In a note to clients today, Stifel analyst Jeffrey Stantial initiated coverage of Flutter with a “buy” rating a 12-month price target of $320, implying potential upside of 24.2% from today’s closing price. That’s above the consensus price forecast of $306.85.
“We see several positives for the shares, including resilient market share leadership in the prized U.S. market, where healthy user acquisition & monetization, mix & scale margin tailwinds, and new state expansion underpin positive estimate momentum, structurally improving business model in mature international markets, given industry-wide transition to more recreational users and product,” observes Stantial.
He lauded Flutter for its leadership positions in at least four of the world’s marquee sports wagering markets, including Australia, the UK, and the US. The Irish gaming company owns 95% of FanDuel, the largest online sportsbook operator in the US, and has footprints in more than 100 countries.
Flutter Fabulous Free Cash Flow Outlook
Among the reasons Wall Street is constructive on Flutter are the operator’s fortress-like balance sheet and its free cash flow prospects (FCF).
Those factors support shareholder rewards and expansion efforts, both of which are underway. Flutter is aiming to repurchase $350 million of its shares this quarter under a $5 billion stock buyback plan announced last year. The operator has also long used smart bolt-on acquisitions to boost its compound annual growth rate (CAGR).
“We forecast a compelling multi-year FCF growth algorithm (~56% CAGR 2024-27E) underpinned by secular TAM expansion and FLUT’s unique product/scale flywheel,” adds Stantial.
The analyst also mentioned the possibility of Flutter joining the S&P 500, which he described as “forthcoming,” as a potential catalyst for the shares. The company meets the profitability criteria for inclusion in the benchmark domestic equity gauge and by shifting its primary listing to New York from London last year, it could be positioned to join the index over the near term.
That would spark a wave of buying among active managers and passive funds that benchmark to the S&P 500. Inclusion in the index would also likely give Flutter bragging rights over rival DraftKings (NASDAQ: DKNG) because the former appears more likely to be the first to join the gauge.
Flutter Positives Outweigh Negatives
Flutter stock isn’t a risk-free story. Competition is fierce in the iGaming and online sports betting industries, and there’s the specter of more states raising sports wagering taxes, which could pinch earnings.
However, Stantial said there’s value in the gaming stock even after its outperformance over the past year, adding that Flutter is attractively valued relative to other internet equities.
“Bottom line, given secular total addressable market growth and a widening moat, we view FLUT as a core multi-year holding with runway for both positive estimate revisions and multiple expansion,” concludes the Stifel analyst.