On Wednesday, Flutter Entertainment (NYSE:FLUT) received confirmation of a Buy rating and a $249.00 price target from BTIG. This follows Flutter's recent announcement of acquiring Snaitech S.p.A., an Italian omnichannel gaming operator, for approximately €2.3 billion ($2.53 billion). The transaction is expected to conclude in the second quarter of 2025.
According to the firm's analysis, the acquisition's headline purchase multiple is around 9.0x based on Snaitech's projected €256 million EBITDA for 2023. When factoring in the present value of anticipated cost synergies, which are estimated at €70 million and expected to be fully realized in the third year post-acquisition, the multiple decreases to approximately 7.5x. The firm also suggests that the multiple could further decline as revenue synergies are realized.
BTIG posits that Flutter's Italian operations have the potential to double in size over the next four to five years. This growth expectation is based on consistent market growth, shifts in market dynamics, and the likelihood that Flutter, along with Lottomatica, will gain market share as licensing costs potentially drive smaller operators out of the market. The firm projects that Flutter and Lottomatica could collectively capture over 75% market share.
While the firm acknowledges that Flutter's leverage will increase in 2025 due to the acquisition, and that the deal, along with another investment in Betnacional, will likely moderate the size of short-term shareholder returns, it views these developments positively. The firm believes that the urgency to establish a presence in Brazil before the early 2025 national betting launch justifies the trade-off, and it sees Italy and Brazil as two of the most significant global growth markets, alongside the United States and potentially Japan in the future.
In other recent news, Flutter Entertainment has reported a 20% increase in second-quarter revenue to $3,611 million and a 17% rise in adjusted EBITDA to £738 million. The company has also announced plans to host an Investor Day event and is in preliminary discussions to acquire Snaitech business from Playtech (LON:PTEC), potentially expanding its European market presence. Barclays and Morgan Stanley have initiated coverage on the company, both assigning an Overweight rating, with Barclays setting a price target of $263.00.
In compliance with regulatory requirements, Flutter Entertainment has made several disclosures through the Regulatory News Service and the U.S. Securities and Exchange Commission. The company's commitment to regulatory compliance and transparency is evident in its continuous communication with investors and the broader market.
Barclays maintains an Overweight rating on Flutter Entertainment, expressing a positive view of the company's recent acquisition, particularly given the Italian market's characteristics. The firm highlighted the considerable total addressable market in Italy and the potential for growth in the digital market.
InvestingPro Insights
Flutter Entertainment's strategic acquisition of Snaitech S.p.A. is a major step in its expansion efforts, and the market is responding with interest. As per InvestingPro data, Flutter's market cap stands at a robust $40.98 billion, reflecting investor confidence. With revenue growth over the last twelve months reaching 16.28% and a gross profit margin of 47.22%, the company's financial health seems to be on a solid trajectory. Additionally, the stock has enjoyed a strong return over the last three months at 24.78%, indicating positive market momentum.
However, it's important to note that analysts have tempered expectations slightly, with three analysts revising their earnings downwards for the upcoming period, which is a critical InvestingPro Tip to consider. Another InvestingPro Tip highlights that the company's short-term obligations exceed its liquid assets, which could present liquidity challenges in the near term. These insights are particularly relevant given the significant investment Flutter is making with the Snaitech acquisition. For those interested in a deeper dive into Flutter's financials and future prospects, InvestingPro offers additional tips and data points that can be accessed at https://www.investing.com/pro/FLUT.
With Flutter Entertainment trading near its 52-week high and at a high Price / Book multiple of 4.12, investors should weigh these metrics alongside the company's growth prospects and recent strategic moves. As the market continues to evolve, keeping an eye on real-time data and expert analysis from InvestingPro will be key to understanding Flutter's position in the competitive gaming and betting landscape.
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