Analysts place bet on this FTSE 100 stock

After meeting investors and analysts in New York last night, one fan of this company believes the US opportunity is not fairly reflected in the share price.

A big upside for shares in Flutter Entertainment (LSE:FLTR) was forecast today after the gaming group hailed the “enormous value creation opportunity” of its key US market.

Flutter’s FanDuel brand has enjoyed huge success since gambling laws were relaxed in 2018, resulting in a current 42% share of US online sports betting and 18% for internet gaming.

But the FTSE 100-listed company believes there’s more to come after estimating a total addressable market of more than $40 billion (£34 billion) by 2030, 4.5 times the size today.

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With its margins expected to be equivalent to those in existing Flutter divisions of 25-30%, this would imply significant levels of long-term profitability.

Chief executive Peter Jackson said: “The superior economics that FanDuel enjoys as the market leader, represents an enormous value creation opportunity for the group as our US business continues to grow.”

The US division also includes the brands Fox Bet and PokerStars, while in the UK and Ireland the company trades through the Sky Betting and Gaming, Paddy Power, Betfair and Tombola brands. It has over 600 Paddy Power betting shops.

Flutter met investors and analysts in New York last night, telling them that the US division remains on track to become the first in the sector to move into profitability in 2023.

The positive US commentary on FanDuel’s prospects failed to lift shares today, having already risen 46% since the summer to 11,115p. But the coverage from many of the analysts present looked to be positive based on this morning’s flurry of “buy” recommendations.

They included Bank of America, which highlighted a big upside for shares to the 16,700p level last approached during Covid lockdowns in March 2021.

It said: “We left the presentation even more positive on FanDuel's opportunity, positioning and ability to grow and outperform in the US.”

The bank believes the US opportunity is not fairly reflected in the share price, especially after an arbitration process recently valued the 18.6% option held by Fox Corporation for a stake in FanDuel at $4.1 billion.

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On FanDuel's success, it pointed to the ability to acquire customers more efficiently and to generate higher revenues from those players. It added: “The strengths act as a virtuous cycle for FanDuel, as the superior returns can be reinvested into enhancing the offering and/or customer acquisition, further fuelling growth.”

Currency movements mean Jefferies today upped its price target to 15,000p, which is split between an improved 6,500p for the US operation and 8,500p valuation for the rest.

Deutsche Bank, which has a target of 15,147p, noted rising barriers to entry and increasingly embedded competitive advantages that underpin Flutter’s long-term growth aspirations.

UBS sits at 13,800p, having highlighted the potential for Flutter to improve its market share in internet gaming.

Flutter’s recent third-quarter trading update revealed that the US division is now the company’s largest after revenues growth of 82% to $700 million.

This followed a strong start to the American Football season, with an average of over one million players on a regular NFL Sunday. The performance caused Flutter to increase its US revenues guidance for the year to between $2.95 billion and $3.2 billion.