Paddy Power owner Flutter could go on the acquisition trail, say equity analysts

An equity research note examining Flutter and its share price by Barclays analysts significantly enhanced the investment bank’s price target on the gambling giant’s stock, from £153 to £200, and upgraded the stock to overweight. Typically, an overweight rating on a stock means it is expected to perform better in the future.

At the time of writing, stock in Flutter, whose CEO is Peter Jackson, was trading at around £171 on the London Stock Exchange.

Driving the Barclays analysts positive outlook on Flutter was the resilience of the company’s FanDuel business in the US. The analysts had been concerned about heightened US competition, including the launch of ESPN Bet, but FanDuel had maintained and grew its share over the past 12 months.

Examining Flutter’s US business plans in 2024 and 2025, Barclays raised its expectations for the gambling group’s US earnings before interest, taxes, depreciation, and amortization by around £70m. It expects greater penetration for online gambling in the US and further US State legislation in the year ahead.

Barclays also wrote that Flutter’s core business, including its UK and Irish businesses, appeared to be de-risked. Its UK market tracker had indicated Flutter “outperformed most of the market” over the third and fourth quarters of the financial year.

The analysts added Flutter was delivering market share gains in the UK online market with the approach of early safer gambling measures “paying off”. However, it added that some in the market question whether Flutter “may need to adopt further safer gambling measures given the extent of the UK outperformance.”

With the company’s debt pile to reduce thanks to US profitability, the Barclays analysts said they expect Flutter to be active in the mergers and acquisition space. It added that Flutter had stated it is looking at a deal in Brazil while it has also expressed interest in Italian lottery tenders, one of which is owned by its Sisal brand.

Looking at Flutter’s financial performance and debt, Barclays said there could be around £3.5bn of “theoretical balance sheet capacity” should it hit certain targets.

Barclays noted the upcoming shareholder vote on shifting its primary listing to the US. If approved the analysts said it could create some share selling pressure ahead of Flutter's fall out of FTSE indices.