On Thursday, Wells Fargo (NYSE:WFC) initiated coverage on shares of Flutter (LON:FLTRF) Entertainment (NYSE:FLUT), assigning an Equal Weight rating and setting a price target of $210. The financial institution's analysis highlighted Flutter Entertainment's promising earnings growth potential, particularly emphasizing the company's performance in the United States market.
The analyst noted that Flutter Entertainment is poised to see a significant compound annual growth rate (CAGR) in earnings before interest, taxes, depreciation, and amortization (EBITDA) of over 20% through 2026. This projection includes an 87% three-year CAGR in the U.S., which contrasts with a more modest 5% CAGR expected from the company's operations outside the U.S.
FanDuel, owned by Flutter Entertainment, was singled out as a critical asset in the company's portfolio. As the U.S. digital market leader, FanDuel's EBITDA is projected to reach $1.5 billion by 2026, which would be 50% greater than the combined EBITDA of the company's UK and Ireland operations.
The analysis further detailed the performance of Flutter Entertainment's various regional businesses. The UK and Ireland segments are reportedly performing well, benefiting from product enhancements and market share gains. The international and Sisal operations are also experiencing growth. However, the Australian division continues to face challenges.
Wells Fargo's valuation of Flutter Entertainment at 14 times the projected 2025 EBITDA suggests that the current risk/reward balance appears fair. This assessment was made in the context of comparing Flutter Entertainment with other industry players, with a preference for the pure-play company DraftKings (NASDAQ:DKNG).
InvestingPro Insights
According to real-time data from InvestingPro, Flutter Entertainment (NYSE:FLUT) is navigating a dynamic market landscape with a market capitalization of $35.26 billion. Despite not being profitable over the last twelve months, analysts are forecasting a brighter horizon, with net income expected to grow in the current year. This optimism is echoed in the company's strong return over the last three months, showing a 16.66% price total return, which may intrigue investors looking for momentum.
InvestingPro Tips suggest caution regarding the company's liquidity, as short-term obligations currently exceed liquid assets. However, with a moderate level of debt, the company's financial leverage is not at an alarming level. Additionally, while the company is trading at high EBIT and EBITDA valuation multiples, the projected growth in earnings and market leadership, as noted in Wells Fargo's report, could justify these premium valuations.
For investors seeking a deeper dive into Flutter Entertainment's financial outlook, InvestingPro offers additional insights and metrics. There are 10 more InvestingPro Tips available for FLUT, which can be accessed at https://www.investing.com/pro/FLUT. Take advantage of our exclusive offer and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full spectrum of data and analytics that could inform your investment decisions.
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