In the fast-paced realm of sports betting and online gaming, Flutter Entertainment (LSE: FLTR) stands tall as a colossus, with huge influence across the globe. This giant, with its market cap tipping the scales at a cool £25.2bn, has punters and investors alike perking up their ears. But is this growth stock a jackpot waiting to happen, or a gamble too far? Let’s shuffle the deck and see what hand we’re dealt.
Diverse offering
The company’s portfolio reads like a who’s who of betting royalty. From the cheeky Irish charm of Paddy Power to the more sophisticated allure of Betfair, and the new kid on the block, FanDuel, Flutter’s tentacles reach into every nook and cranny of the betting world.
If Flutter were a poker player, its American expansion would be the ace up its sleeve. As the US gradually sheds its restrictions on sports betting, the brand is positioning itself to be a key player. As many sectors have seen in the past, if success can be found in the US, it can be a real gold rush.
Positive outlook
The firm’s financials read like a tale of two casinos. On one side, we have a whopping £9.63bn in revenue – enough to make any bookie’s eyes water. On the flip side, a £1.03bn loss looms like a bad beat. But management appear to be doubling down on marketing and tech in its American adventure. This may pay off, but also might be a very expensive mistake if issues with regulation or demand emerges.
As an investor though, here’s where I think it gets juicy. Despite its fairly flat recent performance over the last year, the shares might just be sitting nicely in bargain range.
Based on a discounted cash flow (DCF) calculation, the shares are currently trading at a 36% discount to estimated fair value. It’s far from a guarantee as the sector develops globally, but it could be a decent opportunity for those with the right tolerance for risk.
Regulation fears
As I noted, I’m most worried about potential regulatory hurdles here. Any sudden intervention from regulators in a key market to curb activity could be disastrous for the company. Competition in this industry is also fiercer than a high-stakes poker game, with margins under constant pressure. Any slip up from management, or if another key player seizes market share, and there could be really bad news for investors.
One to watch
Clearly, Flutter Entertainment is not for the faint-hearted investor. It’s a high-roller’s dream – a cocktail of established success and tantalising potential, with a dash of risk to keep things spicy. The upcoming earnings report on 13 August 2024, could be the next spin of the wheel that determines what’s next for investors.
I’d be willing to roll this dice with this growth stock for the right price, so with some potential undervaluation, I’ll be buying next time I have some cash free.
