Jefferies cuts Flutter Entertainment price target to $210 on 10 October 2024 due to US growth fears

Jefferies reduced the Flutter price target by 45% to $210. This is a big change compared to the previous $380 target, signaling caution about US market growth.
By Newsroom | Finance, US Market |

Jefferies has sharply revised its price target for Flutter Entertainment, slashing it by 45% from $380 to $210. Despite this significant markdown, the firm maintains a 'buy' rating. The core argument from Jefferies is that the current market valuation for Flutter, the operator behind brands like FanDuel and Paddy Power, already discounts any future growth in its crucial US market.

The broker's analysis suggests the stock has been de-rated to a point where it implies no future expansion in the US. This comes as Flutter faces questions regarding the impact of 'prediction markets,' a newer form of wagering. The company, however, stated it sees "no evidence of meaningful impact" from these markets, estimating their effect at "low single digits percentage-wise."

Flutter attributes a recent slowdown in the total amount wagered in the US, known as 'handle,' to factors such as customer recycling patterns, an unfavorable sports calendar, and inefficient promotional spending. Jefferies characterized these issues as "reversible rather than structural," indicating a belief that they are not fundamental, long-term impediments to growth.

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The firm pointed to Flutter's successful entry into Missouri as evidence supporting its stance. In that state, prediction markets launched prior to traditional sports betting. Flutter managed to acquire 5% of the state's population within 30 days, suggesting that prediction markets and traditional sports betting may serve distinct customer needs.

Other analysts have also adjusted their outlooks. MoffettNathanson previously cut its price target for Flutter to $265 from $300, while also holding onto a 'buy' rating.

Concerns regarding 'prediction-market volatility' and a "soft start to the NFL season" were cited by Benchmark as reasons for recent price target cuts. Retail sentiment on Flutter Entertainment reportedly dipped to 'bearish' territory. The company is anticipating a relatively modest third-quarter performance, with revenues and earnings likely at their lowest point for the year before a potential rebound.

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Frequently Asked Questions

Q: Why did Jefferies cut the Flutter Entertainment price target to $210 on 10 October 2024?
Jefferies lowered the target by 45% because they believe the current stock price assumes zero growth for the company in the US. They are concerned about recent betting trends, though they still view the company as a 'buy' for long-term investors.
Q: How does the slow NFL season impact Flutter Entertainment's revenue in 2024?
The company reported a soft start to the NFL season, which led to lower amounts of money wagered, known as 'handle.' Analysts believe this is a temporary issue rather than a permanent problem for the business.
Q: What did Flutter Entertainment say about the impact of prediction markets on their business?
Flutter stated that prediction markets have a very small impact on their business, estimated at low single-digit percentages. They noted that their successful launch in Missouri shows they can still grow even when these new markets exist.
Q: What should investors expect from Flutter Entertainment's third-quarter performance?
The company expects its third-quarter performance to be the lowest point for the year in terms of revenue and earnings. However, analysts expect a rebound as the company fixes promotional spending and adjusts to market conditions.