Analyst Keeps Positive Outlook on FanDuel Parent Company Flutter

A wide range of factors can impact the performance of gaming and betting operators, especially across the United States. While increased promotional spending may boost the operators’ expenses, much-anticipated sports events can increase revenue and enable betting operators to engage with new customers.

Earlier this month, Flutter Entertainment, the leading betting and iGaming operator with a wide range of brands, including PokerStars, FanDuel and Sportsbet, among others, released its first quarter financial report, highlighting a comprehensive net loss of $365 million, despite a recorded 16% revenue growth.

In light of the recently released results, James Wheatcroft, an analyst with Jefferies Equity Research, released a new investor note, pointing to recent developments about FanDuel’s parent company, as announced by CDC Gaming. The expert spoke about Flutter’s dip in revenue growth for the market in the US, explaining that it is the result of “new state investment and weak sports margins, exacerbated by higher parlay and basketball mix.”

Still, Wheatcroft remained bullish about the company, highlighting its strong performance outside of the US in combination with better margins for the US market, attributing this to results from April. The Jefferies Equity Research’s analyst retained the 2024 fiscal year estimate for Flutter, predicting a 6% increase in the company’s international revenue together with a 25% uptick in US revenue. The aforementioned figures mean that Wheatcroft expects a $940 million cash flow from Flutter’s international operations in combination with $204 million from the US market.

The expert pointed out: “While the margin weakness was well flagged, we believe the outsized impact to FanDuel was amplified by a skew to parlays (typically higher, but more volatile margins) and basketball (unfavorable March Madness results were a primary source of low margins).” Wheatcroft also said that data from the company’s performance in Illinois reaffirms this view.

DraftKings’ Shares Dip Amid Tax Increase Bill in Illinois

When it comes to Illinois, a recent development impacted the shares of FanDuel’s rival, DraftKings. As of Friday, DraftKings’ shares traded around $40.70 but come Tuesday, a notable decrease was observed. The operator’s price per share decreased by 10.29% to $36.61 per share.

According to Joseph Greff, an analyst for J.P. Morgan, who was quoted by CDC Gaming, the dip in shares was the effect of the passage of a bill proposing a tax increase in Illinois. The proposal gained traction after receiving a green light from the Illinois State Senate and will now seek approval in the House.

Greff explained: “Investors were already baking in a degree of risk related to increased tax rates (in Illinois and/or New Jersey and other states, such as Massachusetts, though the latter seems dead based on recent public commentary).” Despite potential challenges, the analyst advised investors to purchase DraftKings.