With a diversified portfolio of globally recognized brands, continued innovation, strategic acquisitions and partnerships, and competitive advantage, sports betting and gaming giant Flutter Entertainment plc (PDYPY) delivered outstanding performance last year and is well-positioned to capture numerous market opportunities in the foreseeable future.
Therefore, investors could consider buying this fundamentally sound stock to capitalize on the growing online sports betting trend. In this piece, I will discuss several reasons why I am extremely bullish on PDYPY.
Cathie Wood’s ARK Invest releases its “Big Ideas” report annually. This research report highlights the technological breakthroughs evolving today and creating the potential for high-exponential growth. The Big Ideas 2023 report suggested five consumer trends —connected TV, social platforms, online sports betting, video gaming, and digital ownership and non-fungible tokens (NFTs) — that could create a $22.50 trillion opportunity by 2030.
Online sports betting witnessed significant growth in recent years, driven by the growing penetration of connected devices, favorable government laws, and the advancing digital infrastructure. In its latest report, ARK Invest mentioned that online sports betting volume in the United States and Canada made up nearly 86% of total sports betting in 2022, a surge from 17% in 2018.
Furthermore, based on ARK’s research, online sports betting in the United States and Canada will likely grow at an annual rate of 27% over the next five years, representing an approximately $330 billion market.
Headquartered in Dublin, Ireland, leading global sports betting, gaming, and entertainment provider Flutter is well-positioned to benefit from this growing consumer trend. PDYPY operates a range of global brands, such as FanDuel, Sky Betting & Gaming, PokerStars, Sportsbet, tombola, Betfair, TVG, and Paddy Power. The company’s FanDuel is the most popular online betting site in the U.S., with a database of more than 14 million sports fans.
An unparalleled portfolio of products and diversified geographic footprint provides key competitive advantages which empower PDYPY’s brands to win in their respective markets. Within the United States, its sustainable leadership position delivers superior economics and will likely transform the company's earnings potential.
PDYPY’s scale and diversified position outside the United States offer a robust and resilient business model for further high growth and cash generation through regulatory change. This is evident from its strong track record of delivery with compound annual EBITDA growth of 22% since 2017.
For fiscal 2022, the United States was its largest division by revenue. Revenue rose 67% year-over-year to $3.20 billion, with average monthly players (AMPs) exceeding 3 million for the first time in the fourth quarter. FanDuel extended its leadership position with a fourth-quarter online sportsbook market share of 50% while growing its podium position in iGaming to a 21% share.
At its Capital Markets Day in November 2022, the FanDuel team outlined how FanDuel’s advantage of acquiring customers efficiently, customer retention, and growing customer value better than competitors drives its significant market outperformance.
PDYPY is at an earnings transformation point this year and is well-placed to deliver significant growth and progress further against its strategic priorities.
Shares of PDYPY have gained $72.4% over the past six months and 70.7% over the past year to close the last trading session at $94.47.
Here is what could influence PDYPY’s performance in the upcoming months:
Robust Financials
For the year that ended December 31, 2022, PDYPY’s total revenue increased 22% year-over-year to £7.69 billion ($9.55 billion). The revenue growth is driven by the continued expansion of its recreational base, with AMPs up 26% year-over-year to 10.2 million and acquisitions of Sisal and Tombola during the year. The company’s rapidly scaling US business was a primary driver, with revenue 67% higher.
Furthermore, PDYPY’s gross profit grew 20% from the year-ago value to £4.53 billion ($5.63 billion). The company’s adjusted EBITDA came in at £1.05 billion ($1.30 billion), an increase of 4.4% year-over-year.
Impressive Historical Growth
PDYPY’s revenue has grown at a CAGR of 53.2% over the last three years. Also, over the same period, the company’s EBITDA and levered free cash flow have increased at CAGRs of 21.6% and 87.4%, respectively.
Favorable Analyst Estimates
Analysts expect PDYPY’s revenue for the fiscal year (ending December 2023) to come in at $11.43 billion, representing an increase of 24.3% year-over-year. The consensus EPS estimate of $2.41 for the ongoing quarter indicates a 74.8% year-over-year increase. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
In addition, the company’s revenue and EPS for fiscal 2024 are expected to rise 12% and 35.5% year-over-year to $12.80 billion and $3.26, respectively.
POWR Ratings Show Promise
PDYPY’s strong fundamentals and bright outlook is reflected in its POWR Ratings. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. PDYPY has a grade of A for Growth and a B for Sentiment, consistent with its solid financials and favorable analyst expectations.
Also, the stock has a B grade for Momentum. It is currently trading above its 50-day and 200-day moving averages of $83.58 and $67.73, respectively, indicating an uptrend.
PDYPY is ranked #6 out of 21 stocks in the Entertainment-Toys & Video Games industry.
Beyond what I have stated above, we have also given PDYPY grades for Quality, Value, and Stability. Get access to all PDYPY ratings here.
Bottom Line
PDYPY delivered a strong performance in 2022. With leading positions in the world’s largest and fastest-growing regulated and regulating markets, including the United States, the company is uniquely placed to use its scale and capitalize on the rapid growth of the online gaming market.
Given PDYPY’s solid financial performance and promising growth prospects, we think buying this ARK Invest-approved stock could be wise now.
Other Entertainment Stocks to Consider
One could check out these other stocks within the Entertainment-Toys & Video Games industry with an A (Strong Buy) rating: Playtika Holding Corp (PLTK), SciPlay Corporation (SCPL), and Nexters Global Limited (GDEV).
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PDYPY shares were trading at $92.50 per share on Wednesday afternoon, down $1.97 (-2.09%). Year-to-date, PDYPY has gained 35.59%, versus a 7.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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