FanDuel parent Flutter Entertainment is the IBD Stock Of The Day for Wednesday. Shares of the sports betting and gambling company broke out for the third time this year after the release of impressive quarterly results late Tuesday. Analysts expect even more explosive growth in the next few years.
Flutter reported earnings of 43 cents per share adjusted for the quarter, improving from a loss of 10 cents per share last year. Revenue jumped 27% to about $3.25 billion.
The results easily beat FactSet expectations of an adjusted loss of 26 cents per share on $3.06 billion in revenue.
Flutter — which also operates the likes of Paddy Power, Sportsbet and other brands — reported a 16% increase in its average monthly player (AMP) count to 12.92 million.
CEO Peter Jackson commented that the U.S. has seen a strong start to the NFL season. So far, the season's peak wagers per minute are higher than Super Bowl LVII, which is typically the largest betting event on the sports calendar.
Within the U.S., Flutter's FanDuel sportsbook and iGaming products saw AMPs increase 28% to 3.2 million. Flutter's U.S. revenue rose 51%.
However, the company noted that its Q3 outperformance has subsequently been more than offset by unfavorable sports results so far in the fourth quarter.
Flutter Lifts Outlook
Flutter raised its full-year revenue guidance by 1% and is now forecasting 22% growth at the midpoint. However, the company narrowed its U.S. revenue guidance by 1%; it now expects $6.15 billion at the midpoint.
FactSet analysts see full-year revenue rising about 20% to $14.13 billion.
Flutter also raised its adjusted EBITDA guidance by 1% to 35% at the midpoint.
Analysts appear convinced that Flutter is well-positioned to capitalize on the growing sports betting market with expectations that Flutter earnings will soar 400% by 2028.
Needham on Wednesday raised its price target on FLUT stock to 300 from 270 and kept a buy rating on shares, according to The Fly. The firm noted the company's U.S. results for the quarter were better than feared, with management citing Flutter's "best in class" risk and trading.
Benchmark said the results showcased strong performance with U.S. market dominance and steady growth in international markets. Flutter is well-positioned for sustained growth while its cash flow generation remains a "Benchmark Top Idea," the firm wrote. Benchmark lifted its price target on Flutter stock to 275 from 265 and maintained a buy rating.
Sports Betting Boom
Industry prospects look strong, with around 20% of U.S. adults saying they bet money on sports in some way in the last 12 months, according to a 2022 Pew Research Center survey. The American Gaming Association (AGA) also reports the U.S. commercial betting industry saw record revenue of $66.5 billion in 2023, growing 10% compared with 2022's record and representing the third consecutive record-revenue year.
AGA data shows 2023 revenue from sports betting came in at $10.92 billion and iGaming totaled $6.17 billion. Sports betting revenue grew 44.5% vs. 2022 while iGaming rose 23%.
"From the traditional casino experience to online options, American adults' demand for gaming is at an all-time high," AGA President and Chief Executive Bill Miller said in a statement earlier this year.
Through the second quarter of 2024, the U.S. commercial gaming sector notched its 14th straight quarter of annual revenue growth, according to AGA data tracking.
Investors Gamble Flutter Entertainment Can Outduel DraftKings With 400% EPS Growth Expected
Growing Gambling Market For Sites Like FanDuel
Flutter, during its late-September investor day, provided midterm 2027 guidance and a new $5 billion share-repurchase program.
Along with the $368 billion total regulated addressable market by 2030, the company projects the midpoint of its U.S. and rest-of-world 2027 revenue at $21 billion, representing a three-year annual growth rate of 14%. The company is also targeting 2027 adjusted earnings before interest, taxes, depreciation and amortization of more than $5 billion, while its adjusted EBITDA margin grows to 25%.
With built-in demand for Flutter's products, the company expects the North American total addressable market in 2027 to be roughly $70 billion, with the U.S. representing a bulk of that market at $63 billion. The market for the U.S. was about $40 billion in 2022, according to the company.
Flutter said it has "significant" opportunities to expand further from states that have yet to regulate its betting products. The FanDuel parent also maintained its expectations for 80% sportsbook population coverage and 25% iGaming population coverage for the U.S.
Flutter also projects the midpoint of 2027 revenue from "existing" states (where sports betting and iGaming products are currently legal) to be about $9.7 billion. The company also forecasts a long-term net gaming revenue margin of 12% for FanDuel.
Flutter Stock Action
Flutter stock rallied more than 6% early Wednesday, breaking out above a 252.84 buy point for a flat base.
The current buy zone, which extends 5% beyond the buy point, stretches to 265.48.
The latest breakout marks Flutter's third this year, after smaller breakouts in February and mid-September.
Shares of the FanDuel parent are up 16% so far this year through Tuesday's close.
Elsewhere, rival DraftKings climbed 1.5% Wednesday. DKNG shares are consolidating with a 49.57 buy point as DraftKings last week missed Q3 estimates and lowered its outlook.
DraftKings stock has gained about 20% so far this year.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
