JPMorgan upgrades Flutter Entertainment to 'overweight'

The bank said the upgrade was driven mainly by its more positive stance on the US, for which it has increased its revenue and EBITDA estimates by double digit percentages in FY 26 onwards.

This is driven in part by a larger total addressable market (TAM) forecast. JPM said that with US legalisation coming through state by state, it now feels increasingly confident about the TAM opportunity crystallising.

JPM also pointed to further market share gains, including within iGaming, which remains underappreciated by the market, and higher margin assumptions, largely underpinned by scale.

The bank said Flutter’s market leadership across key geographies, underpinned by its strong moat - leading product, scale, brand - puts it in a favourable spot to capture growth opportunities across markets, while keeping it well-positioned to efficiently tackle regulatory headwinds.

"As a result, the growth profile is appealing, with EBITDA CAGR FY 23-26e at more than 25% as US profitability ramps up," it said.

"Its sound circa 60% free cash flow conversion and de-risked balance sheet (circa2x ND/EBITDA) separately allows for near-term capital returns/M&A, further adding to the equity story," it said.

"Overall, we believe that 2023 provided further evidence of FanDuel’s strong positioning in an increasingly promising US market, demonstrating leaps of progress and the resilience of the business model, as confirmed at the Q4 update in Jan…which should drive further upside potential for the shares.

"This comes at a time when the US primary listing will likely broaden the reach of the investor base for the company (end H1/early H2)."

JPM said within its global research coverage of online gaming, US analyst Joseph Greff also sees meaningful upside at Draftkings, which is rated ‘overweight’.

At 0930 GMT, Flutter shares were up 1.6% at 17,485p.

JPM also said in its daily equity research note that it had downgraded Ladbrokes owner Entain to 'neutral' from 'overweight' and cut the price target to 910p from 1,280p. It cited limited visibility over the path to recovery.