Citi has upgraded the target price for Flutter Entertainment PLC (LSE:FLTR) by £10 a share to £180 ahead of its listing in New York next week.
Following Flutter's 17% share price rally post its fourth-quarter trading update for 2023, the investment bank's analysts have taken a closer look at the company's prospects, and specifically its ownership of the fast-expanding FanDual sports book operation.
Key to this optimistic outlook is a comparative analysis with Draftkings Inc (NASDAQ:DKNG). (DKNG), FanDual's main competitor/comparator.
When applying DKNG’s near-term enterprise value/sales (EV/sales) multiples to Flutter's US business, the valuation appears reasonable, Citi said.
However, it becomes especially compelling when considering DKNG's EV/EBITDA (earnings before interest, taxes, depreciation, and amortization) multiples, reflecting Flutter’s superior near-term profitability expectations, the bank added.
An in-depth 'apples-to-apples' comparison between DKNG and Flutter, accounting for variables like share-based compensation and non-software capital expenditure, further justifies the upward price target revision, it went on.
According to these metrics, Flutter's business outside the US is projected to have a valuation multiple ranging between 9.0-9.2x based on EV/Sales and between 6.9-8.4x based on EV/EBITDA.
Citi's upgrade in Flutter’s target price also reflects adjustments in the sum-of-the-parts (SOTP) valuation of the company's ex-US segments.
These adjustments are based on the forecasted EBITDA growth for FY25 and the historical relationship observed between EV/EBITDA and forward growth among European peers.
Citi’s analysis culminates in a firm 'buy' recommendation for Flutter. In late morning trading, the shares were changing hands for £157.75, up 1.8%.