In their respective analyses of the betting juggernaut’s first quarter financial performance, both investment banks highlighted Flutter’s strong US segment, where it retained the top spot in terms of market share.
Both predicted positive developments in this area going forward. Morgan Stanley expects Flutter to become “the first scale player to reach profitability” while Jefferies forecast positive EBITDA in 2023.
“Strong US performance underscores confidence that the FY23E US profitability ‘tipping point’ is fast-approaching,” stated Jefferies.
However, both banks acknowledged a poorer showing from Flutter’s UK business, which Morgan Stanley said was in line with its expectations but “weaker than consensus.”
Commenting on Flutter’s UK performance, it remarked: “This reflects tough (Covid-boosted) comparatives, safer gambling measures and competition, but the mix of each still remains hard to decipher.”
Jefferies went into more detail regarding the forthcoming white paper on gambling reform, and said pre-emptive action by Flutter could mitigate any potential fallout.
Internationally, Flutter outperformed Morgan Stanley’s and consensus estimates, despite what it called “Russia/Ukraine headwinds.”
Morgan Stanley assigned Flutter a share price target of £163 ($204), while Jeffries opted for a slightly lower £155.
All-in-all, Morgan Stanley rated the company’s stock as overweight, reflecting its positive opinion of Flutter’s future prospects.
“The ex-US business may have to exhibit some stability before the US story is fully rewarded,” it said, but added: “We see both strong upside and a favourable risk reward.”
Jefferies, meanwhile, gave an even stronger endorsement of Flutter’s stock, assigning it a “buy” rating.
