Flutter Entertainment Stock Pullback ‘Excessive’ Says Analyst

JPMorgan analysts see the 15% decline in Flutter Entertainment (LON: FLTR) (NYSE: FLUT) shares over the last two months as an overreaction, calling it an “excessive pullback” in a note this week. 

The US investment bank maintained its Overweight rating on the stock, although lowering the price target slightly to reflect potential tax increases.

The analyst note highlights the recent regulatory pressure in the US as the main culprit behind the stock's decline. Negative headlines like tax increases and marketing restrictions have weighed on the company, along with broader weakness in the sector.

However, JPMorgan believes these headwinds are “largely manageable” and were “somewhat expected.” They point out that Flutter, their top pick in the gaming sector, is well-positioned to weather the storm due to several factors.

Firstly, they feel the risks associated with tax hikes in key markets like Illinois and New Jersey are already reflected in the stock price.

In addition, JPMorgan argues that larger companies like FanDuel and DraftKings are better equipped to handle these headwinds through measures like reducing bonuses or adjusting odds. This should also lead to market consolidation, benefiting Flutter in the long run.

The bank highlights FanDuel's leading position in the US market, with its “structural hold” exceeding expectations and strong player engagement. They believe FanDuel is well-positioned to leverage its scale and achieve operating efficiencies.

Despite the headwinds, JPMorgan sees Flutter's underlying momentum as “very appealing.” They point to strong performance in the US and continued market share gains internationally.

“With Flutter our top pick within gaming, we see this as a buying opportunity,” declares JPMorgan. 

While slightly lowering its price target to account for potential tax impacts, JPMorgan remains bullish on Flutter. Its new target of 20,700p offers investors a potential upside of around 40% if achieved.