Image source: Getty Images
In the fast-paced world of sports betting and online gaming, Flutter Entertainment (LSE:FLTR) stands like a colossus, with a huge influence across the globe. This behemoth, with a market capitalisation that stands at a whopping £25.2bn, has punters and investors alike on their toes. But is this growth stock a jackpot waiting to happen, or too much of a gamble? Let’s shuffle the cards and see what hand we’re dealt.
Varied offer
The company’s portfolio reads like a who’s who of the betting world. From the cheeky Irish charm of Paddy Power to the more sophisticated appeal of Betfair, to the new kid on the block, FanDuel, Flutter’s tentacles reach into every corner of the betting world.
If Flutter were a poker player, its expansion into the US would be an ace up its sleeve. As the US gradually lifts restrictions on sports betting, the brand is positioning itself to be a key player. As many sectors have seen in the past, if it succeeds in the US, it can be a real gold rush.
Positive outlook
The company's financials read like a tale of two casinos. On the one hand, we have revenues of £9.63bn, enough to make any bookmaker weep. On the other, a loss of £1.03bn looks like a bad run. But management seems to be doubling down on marketing and technology in its US venture. This may pay off, but it could also be a very expensive mistake if problems arise with regulation or demand.
However, as an investor, I think this is where things get interesting. Despite its relatively stable performance over the past year, the stock could be in a very attractive price range.
Based on a discounted cash flow (DCF) calculation, the stock is currently trading at a 36% discount to the estimated fair value. This is not a guarantee as the sector is developing globally, but it could be a decent opportunity for those with the right risk tolerance.
Fears over regulation
As I have already noted, what worries me most in this case is the potential regulatory hurdles. Any sudden intervention by regulators in a key market to curb activity could be disastrous for the company. Competition in this sector is also fiercer than a high-stakes poker game, with margins under constant pressure. Any slip-up by management, or if another key player takes market share, could be very bad news for investors.
One to keep in mind
Flutter Entertainment is clearly not for the faint-hearted. It is a high-roller’s dream: a cocktail of established success and tantalizing potential, with a dash of risk thrown in for good measure. The next earnings report, due out on August 13, 2024, could be the next turn of the wheel that determines what lies ahead for investors.
I'd be willing to take a chance on this growth stock at the right price, so with some potential undervaluation, I'll buy next time I have some free cash.
