Brazil And US Markets Will Unlock iGaming Opportunities

Key Takeaways

• Expansion in new markets, product innovation, and platform integration are expected to drive user engagement, market share, and sustained earnings growth.
  
• Structural cost efficiencies and deeper iGaming penetration should enhance margins, free cash flow, and shareholder returns over the long term.
  
• Rising regulatory risks, high debt from acquisitions, integration challenges, slowing growth in mature markets, and demographic shifts threaten profitability and long-term expansion.

Catalysts

Operates as a sports betting and gaming company in the United States, the United Kingdom, Ireland, Australia, Italy, and internationally.

• Ongoing expansion of online gambling and iGaming in newly regulated and high-growth markets (e.g., Brazil and the U.S.) is expected to accelerate Flutter's revenue and earnings, leveraging increasing global internet and smartphone penetration and regulatory liberalization.
  
• Product innovation-particularly in live betting and personalized betting features (e.g., "Your Way Parlay," Same Game Parlay Live, and platform migrations across Snai and FanDuel)-positions Flutter to capture greater user engagement and wallet share, supporting both revenue growth and long-term margin expansion.
  
• Integration of recent acquisitions (Snai in Italy, NSX in Brazil) and the realization of platform migrations are expected to unlock substantial cost synergies and efficiency gains, underpinning higher EBITDA margins and sustained earnings growth from improved operational leverage.
  
• Structural cost efficiencies, evidenced by reduced sales and marketing as a percentage of revenue and successful renegotiation of market access agreements (e.g., Boyd), should drive higher net margins and enhanced free cash flow, supporting shareholder returns through buybacks.
  
• Rising direct-to-casino iGaming penetration and exclusive content launches through FanDuel and global platforms are expected to increase market share in iGaming, with a long runway for growth as digital entertainment becomes an entrenched consumer preference, boosting both revenue and retention.

Flutter Entertainment Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Flutter Entertainment's revenue will grow by 16.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.6% today to 10.1% in 3 years time.
• Analysts expect earnings to reach $2.3 billion (and earnings per share of $13.48) by about August 2028, up from $522.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.9 billion in earnings, and the most bearish expecting $1.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.3x on those 2028 earnings, down from 103.2x today. This future PE is greater than the current PE for the GB Hospitality industry at 21.8x.
• Analysts expect the number of shares outstanding to decline by 0.58% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.74%, as per the Simply Wall St company report.

Flutter Entertainment Future Earnings Per Share Growth

Risks

• Increasing regulatory scrutiny and taxation risk in major markets, as highlighted by Illinois' wager fee and ongoing tax changes in Illinois, Louisiana, and New Jersey, could reduce profitability and net margins if more states or international markets adopt similar or harsher measures.
  
• High and rising net debt, currently at $8.5 billion (3x adjusted EBITDA including Snai), and continued acquisitions pose long-term financial risk. Increased leverage may limit flexibility, and persistent high debt levels could pressure future earnings and shareholder returns.
  
• Integration risks and cost synergies from recent major acquisitions (notably Snai and NSX in Italy and Brazil), as well as the migration of technology platforms and brands (such as PokerStars and Sky Bet), may not materialize as planned, risking margin compression and lower than expected synergy-driven EBITDA growth.
  
• Exposure to maturing or saturated markets: While core regions like Southern Europe and Australia are currently performing well, growth in mature markets is slowing and future expansion relies on expensive new market entries (such as Missouri) or product innovation, which could dilute returns and hinder long-term revenue growth.
  
• Long-term secular risks include shifting demographic and consumer trends, such as potential declines in gambling interest among younger generations, and persistent social and regulatory concerns about gambling addiction, which could tighten restrictions and limit Flutter's customer base and long-term revenue trajectory.

Valuation

• The analysts have a consensus price target of $330.527 for Flutter Entertainment based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $393.0, and the most bearish reporting a price target of just $259.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $22.5 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 32.3x, assuming you use a discount rate of 8.7%.
  
• Given the current share price of $306.07, the analyst price target of $330.53 is 7.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.