ii view: betting firm Flutter winded by NFL results
Shares in this owner of brands including Betfair and Paddy Power are up 118% over the last five years. Is this setback a buying opportunity?
8th January 2025 11:39
Unscheduled fourth-quarter trading update to 31 December
ii round-up:
FanDuel and Betfair owner Flutter Entertainment (LSE:FLTR) today reduced its full-year US earnings hopes given some unfavourable sports results during November and December.
Continued strong US player momentum had been offset largely by what has proved to be the most customer friendly National Football League (NFL) season since the launch of online betting nearly 20 years ago. As such, US 2024 revenues are now expected to be around $370 million lower than management’s previous forecast of $6.05-6.25 billion, taking adjusted profit for the region down around $205 million to about $505 million.
Flutter shares, which now have their primary stock market listing in the US, fell around 3% in UK trading, having risen by almost 50% in 2024. UK listed owner of Ladbrokes and part owner of BetMGM in the US, Entain (LSE:ENT), fell by around 2% in London trading.
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Flutter’s US brands FanDuel, FOX Bet and PokerStars generated its biggest slug of revenues in 2023 at close to 40%, prompting the move of its listing to the US.
Countering tough trading in the States, favourable results in the English Premier football league are now expected to leave 2024 UK revenue around 1% higher, meaning adjusted profit will be about 2% higher than previously forecast. UK and Irish revenues totalled a quarter in 2023.
A more detailed fourth-quarter update and guidance for 2025 are due on 4 March.
ii view:
Flutter was formed by the merger of Paddy Power, Betfair and The Stars Group between 2016 and 2020. Today a UK stock market value of around £35 billion ($43 billion) is comfortably above rivals such as DraftKings Inc Ordinary Shares - Class A (NASDAQ:DKNG) and Entain joint venture partner MGM Resorts International (NYSE:MGM). Geographically, Australia and Italy provide other notable regions, generating around 12% of 2023 revenues each, with the rest of world which includes India and Brazil providing the balance of about 13%.
For investors, this latest unscheduled trading update is a reminder that adverse sporting results can hinder profit margins. Problem gaming and the potential for increased future regulation and taxes across any of its territories should not be forgotten. Although better than Q3 2023, third quarter 2024 results saw a loss per share of $0.58, while the lack of any dividend payment contrasts with a forecast yield of 2.7% at rival Entain.
To the upside, geographical diversity has helped counter tough US trading. Previous acquisitions included buying Snaitech, an Italian company within Europe’s largest regulated market with footholds also in India and Brazil. Third-quarter average monthly players increased 16% year-over-year to 12.92 million, while 2023’s adjusted profit (EBITDA) of $1.87 billion was better than 2022’s $1.29 billion.
On balance, and while some caution remains sensible, strong brands and an increasingly global footprint are likely to keep fans of this gaming giant optimistic about the long term.
Positives:
- Diversity of both business type and geographical location
- Focus on costs
Negatives:
- Possible ethical concerns
- No dividend payment
The average rating of stock market analysts:
Buy
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