On Friday, UBS initiated coverage on Flutter Entertainment (NYSE:FLUT) stock, assigning a Buy rating and setting a price target of $306.00. The new coverage comes ahead of the company's third-quarter results, which are scheduled to be announced on November 12. UBS predicts a 24% year-over-year increase in group revenue and expects a 3% top-line beat, attributing the growth to strong performances in both the U.S. and rest of world segments.
The UBS analyst noted that despite guidance indicating a loss for the U.S. segment in the third quarter, revealed during the second quarter, the revenue beat is unlikely to translate to adjusted EBITDA. However, the firm anticipates that Flutter will reaffirm its full-year guidance, including U.S. revenue close to $750 million. This outlook is seen as favorable, especially in light of the recent market concerns about U.S. hold in early Q4, which led U.S. peer DraftKings (NASDAQ: NASDAQ:DKNG) to lower their FY24 guidance.
Flutter Entertainment's third-quarter performance is viewed as a potential positive catalyst for the stock. The analysis underlines that FanDuel, a Flutter subsidiary, is trading at an effective 9% discount to DraftKings on a FY26E EV/EBITDA basis. This assessment is made after adjusting the Rest of World business to 7x FY26E EBITDA.
Investors and market watchers are now looking forward to the actual third-quarter results to see if Flutter Entertainment can meet or exceed the growth expectations set forth by UBS. The positive coverage by the investment firm suggests confidence in the company's ability to navigate the current market uncertainties and capitalize on its strategic positioning.
In other recent news, Flutter Entertainment has been making significant strides in its operations. The company reported a robust Q2 performance with a 20% increase in revenue to $3,611 million and a 17% rise in adjusted EBITDA to £738 million. Additionally, Flutter Entertainment confirmed its acquisition of Italian gaming operator Snaitech S.p.A. for approximately €2.3 billion ($2.53 billion), expected to finalize in Q2 2025. The company has also applied for a block listing of shares and disclosed an update on its total voting rights.
Several analyst firms have offered their assessments of these developments. Benchmark reiterated its Buy rating on Flutter Entertainment, viewing the recent pullback as an opportunity. Barclays (LON:BARC) maintained an Overweight rating on the company with a price target of $275. Susquehanna increased its price target for Flutter Entertainment, highlighting the company's growth potential and pending acquisitions in Italy and Brazil.
These are recent developments that investors should consider. It's important to note that this information does not predict future performance but offers insight into the company's recent actions and analyst assessments.
InvestingPro Insights
Flutter Entertainment's financial metrics and market performance align with UBS's optimistic outlook. According to InvestingPro data, Flutter's revenue growth remains strong, with a 16.28% increase over the last twelve months and a notable 20.33% growth in the most recent quarter. This robust top-line performance supports UBS's prediction of a 24% year-over-year increase in group revenue for the upcoming Q3 results.
InvestingPro Tips highlight that net income is expected to grow this year, and analysts predict the company will be profitable in the current fiscal year. These projections are in line with UBS's positive stance on Flutter's financial trajectory. Additionally, the company's strong return over the last three months, as noted by InvestingPro, reflects the market's growing confidence in Flutter's business model and growth prospects.
It's worth noting that Flutter operates with a moderate level of debt, which could provide financial flexibility as it pursues growth opportunities in the competitive gaming market. For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Flutter Entertainment, providing a deeper understanding of the company's financial health and market position.
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