Morgan Stanley (NYSE:MS) has initiated coverage on shares of Flutter Entertainment (LON:FLTRF) (NYSE: FLUT), assigning an Overweight rating to the stock along with a price target of $247.00. Flutter Entertainment, recognized as a leading figure in the online gambling industry, has been acknowledged for its substantial global growth potential and its dominant market presence.
The company, approximately three times larger than its closest competitors in terms of revenue, has secured top positions in various international markets, including the US and the UK. The analyst from Morgan Stanley highlighted the significant uptick in US profitability, which is expected to alter the company's financial dynamics positively.
Furthermore, the recent move to list Flutter Entertainment's shares on the US stock exchange has been anticipated to enhance trading liquidity. The inclusion in major indices is also predicted to provide additional support to the stock's performance.
The analyst underscored the attractive valuation of Flutter Entertainment, noting that the company is trading below the valuation ranges seen before the repeal of the Professional and Amateur Sports Protection Act (PASPA), with a forecasted 9.9x 2026 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio.
In other recent news, Flutter Entertainment reported robust second-quarter results, with a 20% revenue increase to $3,611 million and adjusted EBITDA rising 17% to £738 million. The company also revised CEO Peter Jackson's contract, reducing his salary by 13.5% to $1,390,000 but increasing his annual cash bonus potential for 2025. Jackson was also granted equity awards, including restricted share units and performance share units.
In addition to these changes, Flutter Entertainment is in preliminary discussions to acquire the Snaitech business from Playtech (LON:PTEC), a move that could expand its European market presence. However, no definitive agreement has been reached yet.
Analysts have reacted positively to these developments. UBS raised its price target for the company to GBP222.00 while maintaining a buy rating. The firm anticipates Flutter Entertainment will generate approximately $2 billion in adjusted free cash flow by fiscal year 2025 and reduce its leverage ratio to 0.97 times. Other firms, including Oppenheimer, BTIG, and Morgan Stanley, have also expressed positive outlooks for Flutter Entertainment's future.
InvestingPro Insights
As Flutter Entertainment (NYSE:FLUT) captures the attention of investors with its global growth potential and dominant market presence, InvestingPro data and tips provide additional insights into the company's financial health and market valuation. The company's market capitalization stands at $37.61 billion, reflecting its substantial size within the online gambling industry. Despite recent challenges, analysts predict that the company will be profitable this year, aligning with Morgan Stanley's optimistic coverage. This is an important consideration as it signals potential for a turnaround in financial performance.
On the valuation front, FLUT is currently trading at a high EBITDA valuation multiple, which suggests that the market may be pricing in expectations for future growth and profitability. Additionally, with a price close to its 52-week high at 92.81% of the peak, the stock's current momentum is noteworthy. However, it's important to consider that three analysts have revised their earnings downwards for the upcoming period, which could signal caution for investors expecting immediate growth.
InvestingPro Tips indicate that despite short-term challenges, such as short-term obligations exceeding liquid assets, the company operates with a moderate level of debt, which may provide some financial flexibility. For those interested in further analysis and tips, InvestingPro features additional insights on FLUT, including a total of 9 tips that could help investors make more informed decisions.
The InvestingPro Fair Value estimate of $218.36 suggests a more conservative outlook compared to Morgan Stanley's target of $247.00, yet it remains above the current price, indicating potential for upside. Investors can explore these metrics and tips in greater detail by visiting InvestingPro's dedicated section for FLUT at https://www.investing.com/pro/FLUT.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.