Long Term Legalization And Cost Transformation Will Support A Stronger Global Betting Leader

Catalysts

About Flutter Entertainment

Flutter Entertainment operates global online sports betting, iGaming and related gaming brands, including FanDuel in the U.S.

What are the underlying business or industry changes driving this perspective?

• Expansion of FanDuel Predict into U.S. states without regulated sports betting widens Flutter’s addressable audience. This can feed future cross sell into full Sportsbook and iGaming, supporting long term revenue growth and customer lifetime value.
• Ongoing state level legalization of online sports betting and iGaming, combined with FanDuel’s current #1 position in both categories in the U.S., supports the company’s ability to benefit from higher handle and gaming activity. This can translate into higher group revenue and earnings over time.
• Rapid U.S. iGaming progress, including 44% revenue growth in Q3 and exclusive content such as Huff 'N Lots of Puff and Wonka titles, points to deeper customer engagement. This can support higher iGaming revenue and improved margin mix given the typically higher unit economics versus Sportsbook.
• Global scale in pricing, risk management and product development, shown in Same Game Parlay capabilities, the Your Way offering and outcome based pricing, positions Flutter to maintain strong product economics. This can support gross margins and ultimately net margins across both U.S. and international operations.
• Execution on cost transformation, including the US$300m program, Boyd market access savings of about US$65m annually and technology platform migrations such as Sky Bet and Snai, creates operating leverage that can support adjusted EBITDA growth and higher earnings even if top line conditions vary.

Assumptions

This narrative explores a more optimistic perspective on Flutter Entertainment compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Flutter Entertainment's revenue will grow by 20.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1.4% today to 10.3% in 3 years time.
• The bullish analysts expect earnings to reach $2.8 billion (and earnings per share of $16.55) by about January 2029, up from $-221.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.0 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.4x on those 2029 earnings, up from -174.0x today. This future PE is greater than the current PE for the GB Hospitality industry at 21.8x.
• The bullish analysts expect the number of shares outstanding to decline by 1.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.21%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Regulatory risk across multiple regions is front and center, with India already forcing Flutter to take a US$556 million noncash impairment and cease real money gaming at Junglee and with management openly flagging potential gaming tax increases in the U.K. and higher tax costs such as the Illinois wager fee. These could structurally pressure revenue growth and net margins if similar actions spread to other key markets.
• The business model still shows sensitivity to customer friendly sports results and elevated promotional activity, which led to lower Sportsbook revenue in the U.S., a US$280 million reduction in adjusted EBITDA outlook for 2025 and an updated full year guidance implying US$380 million less adjusted EBITDA. A prolonged period of unfavorable results or sustained high generosity from competitors could weigh on revenue, gross margin and earnings.
• Competition in U.S. online betting and iGaming remains intense, with management repeatedly pointing to uneconomic offers from rivals and the need to respond with higher investment in customer acquisition and retention. If this persists, it could force Flutter either to spend more to defend share or accept lower share, in both cases risking pressure on adjusted EBITDA and long term earnings.
• The planned expansion of FanDuel Predict comes with sizeable upfront investment of US$40 million to US$50 million in Q4 2025 and US$200 million to US$300 million in 2026, while management is still assessing customer behavior, pricing and payback. If prediction markets do not scale or convert effectively into regulated Sportsbook customers, the incremental cost base could dilute margins and delay the path to higher group earnings.
• Flutter is still operating with leverage of 4x, or 3.7x including Snai on a pro forma basis, while also committing to a multi year US$5b capital return and ongoing acquisition and transformation spending. This increases the company’s exposure if cash generation underperforms guidance or one off items like impairments and market access payments reoccur, potentially constraining financial flexibility and affecting future net income.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Flutter Entertainment is $369.27, which represents up to two standard deviations above the consensus price target of $296.59. This valuation is based on what can be assumed as the expectations of Flutter Entertainment's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $380.0, and the most bearish reporting a price target of just $222.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $26.8 billion, earnings will come to $2.8 billion, and it would be trading on a PE ratio of 29.4x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $219.75, the analyst price target of $369.27 is 40.5% higher.
  
• 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.