Regulatory Headwinds And Cost Pressures Will Shape Sports Betting Expansion Over The Coming Years

Catalysts

About Flutter Entertainment

Flutter Entertainment operates global online sports betting, iGaming and related prediction products, led by its FanDuel brand in the U.S. and a portfolio of leading international platforms.

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

• Although the expansion of FanDuel Predict into currently non betting U.S. states opens a large new audience and future cross sell funnel, the high upfront investment of up to $300 million in 2026, combined with unproven customer lifetime value, could weigh on earnings and delay margin expansion if monetization lags expectations, which could pressure near term EBITDA.
• While online iGaming adoption continues to grow strongly in the U.S. and key international markets like Italy and Turkey, increased regulatory scrutiny and tax hikes such as Illinois and potential U.K. gaming tax changes may erode the economic upside of that growth and cap net margin improvement even as headline revenue rises.
• Despite FanDuel’s scale leadership in U.S. Sportsbook and an improving product mix in NBA and parlays, persistently elevated promotional intensity and competitors’ willingness to spend uneconomically could structurally compress unit economics, limiting contribution margin and slowing the pace of earnings growth.
• Although integration of Snai, Sisal and other acquired assets is on track and the $300 million cost transformation program is progressing, execution risk around large scale platform migrations and organizational redesign could delay synergy capture and keep operating expenses higher for longer, which could dampen operating margin expansion.
• While long term legalization of sports betting and iGaming across more U.S. states and markets like Brazil supports a growing addressable market, abrupt adverse actions such as India’s ban on real money skill gaming highlight ongoing regulatory volatility that can trigger impairments and revenue loss, increase earnings variability and constrain valuation upside.

Assumptions

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

• The bearish analysts are assuming Flutter Entertainment's revenue will grow by 14.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -1.4% today to 5.6% in 3 years time.
• The bearish analysts expect earnings to reach $1.3 billion (and earnings per share of $8.3) by about December 2028, up from $-221.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $4.2 billion.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 39.0x on those 2028 earnings, up from -173.9x today. This future PE is greater than the current PE for the GB Hospitality industry at 23.7x.
• The bearish 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 9.19%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The significant long-term investment of between $200 million and $300 million in 2026 to build FanDuel Predict, on top of $40 million to $50 million of incremental EBITDA cost in Q4 2025, could generate stronger than expected customer acquisition and cross sell into regulated sports betting and iGaming, supporting faster revenue growth and a sharper inflection in group earnings.
• FanDuel’s entrenched scale leadership in U.S. Sportsbook and iGaming, evidenced by a 47% NGR share in September and 44% iGaming revenue growth with 27% GGR share, alongside exclusive content and product innovation like Same Game Parlays and NBA integrations, may sustain above market growth and expand net margins as promotional intensity normalizes.
• The ongoing global cost transformation program targeting $300 million, combined with technology re platforming in the U.K. and integration of acquisitions such as Snai and Betnacional, could drive operating leverage and higher than expected EBITDA and free cash flow as synergies are realized over 2026 and beyond.
• Further state legalization of sports betting and iGaming in the U.S., potentially accelerated by prediction market activity and new media partnerships such as Amazon for the NBA, may expand Flutter’s addressable market and deliver structurally higher long term revenue and profit growth than currently embedded in expectations.
• Flutter’s demonstrated ability to mitigate regulatory and tax headwinds, such as Illinois wager fees and potential U.K. gaming tax increases, through pricing changes, product mix shifts and scale advantages could protect or even enhance net margins, resulting in stronger long run earnings growth than implied by a flat share price outlook.

Valuation

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

• The assumed bearish price target for Flutter Entertainment is $226.48, which represents up to two standard deviations below the consensus price target of $299.52. 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 more bearish 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 bearish analyst cohort, you'd need to believe that by 2028, revenues will be $22.9 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 39.0x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of $219.7, the analyst price target of $226.48 is 3.0% 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.