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In the fast paced world of online sports betting and gaming, Flutter Entertainment (LSE: FLTR) stands tall as a colossus, with enormous global influence. The giant, with a market cap tipping at a cool £25.2bn, has players and investors alike scratching their ears. But is this growth stock a jackpot waiting to happen, or a gamble too far? Let's shuffle the deck and see which hand is dealt.
Various offers
The company's portfolio reads like betting royalty. From the sly Irish charm of Paddy Power to the sophisticated allure of Betfair, and the new kid on the block, FanDuel, Flutter's tentacles reach into every nook and cranny of the betting world.
If Flutter were a poker player, its American expansion would be an ace up its sleeve. As the US gradually loosens its restrictions on sports betting, the brand is positioning itself to be a key player. As many sectors have seen in the past, if success can be found in the US, it could be a real gold rush.
Good idea
The firm's financials read like a tale of two casinos. On the other hand, we have a total of £9.63bn – enough to make any bookie's eyes water. On the other hand, the loss of £1.03bn is like a bad hit. But executives seem to be doubling down on marketing and technology on their American tour. This can pay off, but it can also be a costly mistake if legal or regulatory issues arise.
As an investor, this is where I think it gets wet. Despite its recent low performance over the past year, the stock may be sitting well in the bargain.
Based on a discounted cash flow (DCF) calculation, the shares are currently trading at a 36% discount to fair value. It is far from a guarantee as the sector develops globally, but it could be a good opportunity for those with the right risk tolerance.
Fear of being controlled
As I noted, I'm more concerned about potential regulatory hurdles here. Any sudden intervention from regulators in a key market to curb activity would be disastrous for the company. Competition in this industry is also more intense than in high-level poker, with margins under constant pressure. Any slippage in management, or if another key player takes market share, and there could be really bad news for investors.
One to watch
Clearly, Flutter Entertainment is not an investment for the faint of heart. It's a high-roller's dream – a cocktail of guaranteed success and exciting potential, with a dash of risk to keep things spicy. The upcoming earnings report for August 13, 2024, may be the next turning of the wheel that determines what's next for investors.
I'd be willing to roll the dice on this reasonably priced growth stock, so regardless of potential downside, I'll be buying the next time I get free cash.
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