Stifel’s surprise gaming pick leads a sector bracing for a choppy earnings season
Investors are closely watching Stifel's recommendation for Flutter Entertainment (F:PPB), the top pick ahead of the company's third-quarter earnings. While Flutter faces potential challenges from unfavorable sports results and regulatory uncertainty, improving U.S. betting trends and a wider valuation discount compared to DraftKings present opportunities.
Stifel lowered its price target for Flutter from $133 to $125, anticipating a 7% miss in third-quarter adjusted EBITDA due to unfavorable sports outcomes and Flutter's exit from Brazil. However, FanDuel's U.S. sports betting handle is growing at a 10% year-over-year rate, outpacing the 5% growth expected by analysts. Additionally, Flutter's promotional spending has decreased relative to handle, suggesting potential market-share gains without increased spending.
Stifel's valuation discount to DraftKings has widened to around 40% based on projected 2027 EBITDA, making it the preferred stock among the two into earnings.
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