Recent fall in Flutter's stock "excessive", says JPMorgan

JPMorgan has reiterated its 'overweight' rating on gambling group Flutter Entertainment, saying that the recent drop in the shares has been "excessive".

The stock remains the bank's top pick within the gaming sector, with recent weakness highlighted as a "buying opportunity".

Flutter's share price surged at the start of the year on the back of strong results, which showed a 25% jump in revenues in 2023, but has struggled to keep up momentum. In fact, after hitting a 52-week high of 17,980p in March, the stock has fallen around 15%.

JPMorgan analyst Estelle Weingrod put the recent pullback down to "a flurry of negative regulation headlines in the US (e.g., tax increase, college prop bets ban, marketing restrictions) as well as some overall weakness within Travel & Leisure more broadly (underperforming Stoxx Europe 600 by >10%)".

"Whilst we see these regulatory headwinds as largely manageable and somewhere expected, their cadence and magnitude (especially on the US tax front) has caught the market by surprise, we believe," Weingrod said.

The analyst said that much of the risk related to tax increases has already been baked in, while larger-scale operators like Flutter's US sports betting division FanDuel should be better equipment to mitigate the impact.

"All in all, we believe FanDuel is among the best positioned in a very appealing sector with attractive growth prospects at a time when it can further leverage its scale, hence more likely than smaller operators to realise operating efficiencies in the US (in terms of promotions etc.)," Weingrod said.

The bank has a 20,700p target price for the stock, which was more or less flat at 14,480p by 0919 BST.