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Will Flutter Entertainment’s share price soar after Q3 earnings?

Flutter Entertainment’s share price has performed strongly since half-year results were published in mid-August. In the results, the owner of major gaming brands such as Betfair and Paddy Power said US sales had shot up by 50%, even as losses in the country widened. Shareholders will be looking for signs of continued growth in upcoming third quarter earnings.

Flutter Entertainment’s [FLTR.L] share price has delivered a knockout performance since the start of August, outpacing both rival bookmakers and the FTSE 100. A major catalyst was its well-received half year results published that month. Despite the results showing widening losses, Flutter’s management painted a positive outlook for the full year with strong revenue growth in the US.

Upcoming third quarter earnings, due 9 November, could continue Flutter’s stock price momentum, although a rise in the cost of living could impact revenues.

Whats happening with Flutter Entertainments share price?

Since 1 August, the Flutter Entertainment stock price has gained 38.25%, closing Friday 4 November at 11,510p. Flutter Entertainment’s share price enjoyed a 16% bounce following the publication of half-year results on 12 August and has managed to continue that upward momentum through to Friday’s close.

Overall, the stock has dropped 2.13% this year, beating rival bookmakers Entain [ENT.L] and 888 [888.L], which have seen respective 23.71% and 67.49% declines.

US performance a must-watch in Q3 earnings

Flutter’s US business will be closely watched in this week’s Q3 earnings. Online sports gambling in the US is growing as more states legalise gaming in the pursuit of tax revenues.

In the second quarter of 2022, sports betting revenue in the country hit $1.42bn, up 58.7% compared to the same period the previous year, according to the American Gaming Association's Commercial Gaming Revenue Tracker report. By 2025, Morgan Stanley expects the US sports betting market to be worth $12.8bn.

Flutter may be best known as the owner of big gaming brands including Betfair and Paddy Power in the UK and Ireland, but in the US it commands a 51% share of the sports betting market under its FanDual brand.

In the first six months of the year, Flutter’s US revenue rose 50% year-on-year to £1.05bn. In that period, EBITDA losses in the US increased 53% year-on-year to £132m. Sales and marketing costs in the country increased 29% year-on-year to £399m, while operating costs were up 46% year-on-year to £240m.

Flutter is forecasting US revenues of between £2.3bn to £2.5bn for the full year, with an EBITDA loss of between £225m to £275m, assuming FanDuel online sportsbook launches in Kansas in Q4 2022. Flutter has said that it expects its US business to swing into full year positive EBITDA in 2023 - something to keep tabs on in this week’s earnings.

Across the group, Flutter’s after tax losses widened to £112m in the six months up to 30 June, up from a £86m loss in the same period the previous year. Underlying earnings were down 23% year-on-year at £434m, despite an 11% rise in group revenue to £3.39bn. Flutter has guided for full year underlying profits of between £1.29bn to £1.39bn.

Are analysts betting on Flutter?

Despite the soaring share price, Flutter isn’t immune from the wider pressures facing the economy. Analysts at Deutsche Bank lowered their price target on Flutter and fellow bookmaker 888 in a 3 October research note over fears that a longer-than-expected period of higher interest rates would dampen the European leisure market.

The Deutsche Bank analysts cut their target on Flutter to 13,500p from 13,820p, and trimmed their target on 888 from 296p to 230p. The analysts reiterated ‘buy’ ratings for both stocks. The revised price targets were based on the higher cost of debt and valuation, rather than any downturn in disposable income from customers. Flutter reported having a £3.8bn debt pile at the end of 30 June.

The analysts said that “the rise in interest rates will impose further pressure on discretionary spend”, which they will take into consideration in future research notes. It will be interesting to see if Flutter provides any insight on whether the squeeze in cost of living has transferred over to lower customer spend in its third quarter.

Of the 20 analysts polled by the Financial Times, Flutter has a median price target of 13,500p, suggesting a 17.3% upside on Fridays close. Of the 26 offering ratings, a majority of 15 have an ‘outperform' rating on the stock.

Disclaimer Past performance is not a reliable indicator of future results.

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