FLUT

Publicly traded companies mentioned herein: Airbnb Inc (ABNB), DoorDash Inc (DASH), DraftKings Inc (DKNG), Entain PLC (ENT LN), Flutter Entertainment PLC (FLUT), Penn Entertainment Inc (PENN), Uber Technologies Inc (UBER)

Highlights

The presenter is long shares of Flutter Entertainment PLC (FLUT), the largest online sports betting & iGaming operator in the world, and expects FLUT’s US asset, FanDuel, will account for ~50% of the company’s profits in the next 12 – 24 months and the majority thereafter. Outside the US, its main markets are the UK, Italy, and Australia, with Brazil and India representing exciting growth markets. A main reason for the stock’s recent multiple contraction and underperformance relative to the broader market is the Illinois sports betting tax hike. This has created an overhang on the sector, with investors worried that tax increases over time will cause earnings to compress. While this dynamic has already occurred in Australia and the UK without overly concerning impacts on margins and growth, more interestingly, DKNG recently announced it will introduce a tax surcharge next year in high tax rate states to keep itself on the hook for only a 20% tax rate. The presenter expects the entire industry will follow DKNG’s lead, but FLUT will wait to see the impact; he views this as a win-win for FLUT, as either the main bear case will be disproven or customer frustrations will drive market share shifts from DKNG to FLUT. Separately, FLUT continues to execute in the US, and the ex-US business will lap historically easy comps in 2H’24. Despite this, the stock has detached from the fundamentals, and the current $190 share price implies a ~12x valuation on his 2026 FCF. In contrast, he values the stock at 20x – 25x 2026 FCF since the business should be compounding revenues at a mid-teen% rate with an earnings acceleration story from the margin improvement in the US.