A first look at Flutter Entertainment; Backroads Scotland trip started
At last week's Value Investing Seminar in Italy, Gustavo Pifano of Gabelli Funds pitched the beaten-down shares of gaming company Flutter Entertainment (FLUT). It operates, among other things, prominent sports-betting site FanDuel.
In addition to being an excellent pitch, this idea caught my eye for two reasons...
First, we recommended Flutter in our flagship newsletter, Stansberry's Investment Advisory, in August 2019. We held the shares until December 2024, when our thesis on sports betting was validated and the stock had become fully valued. So we wisely exited the position for a 251% gain.
Second, my old friend Michael Burry of The Big Short fame recently posted on Substack (for paid subscribers) that he has been buying the stock, along with sports-betting company DraftKings (DKNG).
He writes that both are great businesses with high returns on investment, but they're currently facing some headwinds:
The big threats are new prediction markets, which structures its products as swaps under the Commodity Futures & Trading Commission. As securities, prediction business event contracts are automatically available in all 50 states while avoiding state gaming taxes. Prediction markets also do not have their own infrastructure but ride on the back of Robinhood, Webull, crypto.com etc.
The threat is the volume hit, and it has hurt DraftKings and Flutter stocks.
I believe that the political climate will not tolerate this. Prediction markets exist in a loophole adjacent to a heavily regulated and taxed industry. In time, prediction markets will be subsumed into regulation and taxation.
Burry continues:
Both Flutter and DraftKings also have launched predictions markets efforts under their own branding.
DraftKings is inflecting as an operating business and the value is in the transition I foresee in the near future. Flutter has been hurt by capital misallocation in the past, but is a fundamentally very good operating business with terrific scale.
... my valuation assumes the focus is now on debt paydown and share buybacks. The debt level should force such behavior.
Since its peak last July, Flutter's stock has fallen by a staggering 65% and now sits near a four-year low, as you can see in this chart:
Let's take a look at Flutter's historical financials and valuation...
Revenues and operating income have grown tremendously over the past two decades. Though the latter was down 55% year over year in the first quarter:
Likewise, free cash flow ("FCF") rose strongly over time before declining recently:
Flutter has allocated its FCF toward two large acquisitions of Italian gaming companies – Sisal in 2022 and Snaitech in 2024. It has also recently ramped up share buybacks:
Acquisitions and share repurchases far exceeded FCF in 2025, resulting in a spike in net debt – which is high, but not dangerously so:
In summary, Flutter's financial picture isn't great, or even good – I'd say it's okay. Profits and FCF have declined while debt has risen.
So it's not surprising that the stock is down a lot. But has it overshot? Is it cheap enough to buy?
At yesterday's closing price of $108.47 and consensus analysts' estimates of $5.93 per share this year (down from $7.94 last year), it trades at 18.3 times:
This is well below its average of 30.1 times forward earnings over the past two-and-a-half years. But it's not exactly cheap at current levels, especially in light of rapidly growing competition from prediction markets Kalshi and Polymarket, which have huge advantages.
Burry is correct that these competitors "exist in a loophole adjacent to a heavily regulated and taxed industry." But it's not clear to me if regulators or courts are going to act anytime soon to close this loophole.
Until they do, Flutter is going to continue to face major headwinds. So I'm going to remain on the sidelines.
My team and I will continue to closely follow Flutter. If we decide it's time to re-recommend the stock, as always, Stansberry's Investment Advisory subscribers will be the first to know. To become one if you're not already, click here.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. Yesterday morning, Susan and I met up with 15 other Americans in Inverness, Scotland and started this six-day Backroads trip (our 12th): Scotland's Inverness to Isle of Skye & Oban Hiking & Walking Tour. We visited Cawdor Castle and did a 3-mile hike along Upper Loch Torridon. Then I went for a 3-mile trail run in the hills above our hotel. Here are some pictures:
