HSBC thinks it’s time to buy Flutter Entertainment . The bank upgraded the FanDuel parent to buy from hold. Analyst Joe Thomas did lower his price target to $228 from $265, though that still signals upside of 18% from Friday’s close. Thomas wrote that, while Flutter’s third-quarter results disappointed and the company shared lackluster guidance, much of the risk looks transitory. Flutter also had to surrender its license in Nevada after deciding to venture into sports prediction markets, although the company “maintains that it is comfortable with its assurances from other states,” Thomas wrote. FLUT YTD mountain FLUT YTD chart “The forced withdrawal from Nevada is disappointing to us, but we do not think investors should be unduly worried about knock-on impacts elsewhere: management deserves some benefit of the doubt, given its track record, and the fact that it did not have to launch the product,” he added. “Management stated there is limited impact to the group in markets where it already operates and therefore the defensive rationale is limited. This appears to be about future opportunities as states liberalize.” Thomas also said that any risks around U.S. prediction markets and impacts from higher UK taxes already seem to be priced into Flutter’s valuation currently. With these factors already weighing the stock down, Thomas sees more implied upside available going forward. “While news flow has been negative, we do not think that the risks are as bad as feared and are more than reflected in the share price,” the analyst wrote. “We have some concerns about the slowing U.S. sports betting market, and think it will be difficult to get a quick return on the investments that management is making into prediction markets. However, there is also an opportunity to benefit from new U.S. state liberalizations and, after severe weakness, we think the shares look cheap on balance on 20x P/E (16x EV/EBIT) once we factor in UK tax increases.” U.S.-listed shares of Flutter rose more than 1% in the premarket following the upgrade. Most analysts are bullish on the stock. LSEG data shows that 22 of 25 who cover Flutter rate it a buy or strong buy.
