Morgan Stanley: Flutter’s ‘confident’ FY2025 outlook could lead to ‘downside risks’
The research firm stated Flutter kept to its September 2024 Investor Day framework while ‘normalizing’ for negative US sporting results as part of the FY2025 report.
Key Points
- During Q4 2024, Flutter’s US revenue grew by 14% year-over-year for a total of $1.6bn, but the group’s adjusted EBITDA decreased by 3% from the prior year period to $163m
- Morgan Stanley cited downside risks such as increased competition in the US market for Flutter, as well as a “slowdown” in iGaming momentum
Following Flutter Entertainment’s Q4 and fiscal year (FY) 2024 financial report on March 4, Morgan Stanley has conducted its own research study for the results, pointing to potential “downside risks” for 2025.
Throughout FY2024, Flutter’s US operations reported $5.8bn of revenue, resulting in a midpoint guidance projection of $7.7bn for FY2025. During the fourth quarter of 2024, US revenue grew by 14% year-over-year for a total of $1.6bn, but the group’s adjusted EBITDA decreased by 3% from the prior year period to $163m.
The increase in revenue was generated despite what Flutter CFO Rob Coldrake described as “unfavorable sports results” during the quarter. FanDuel experienced the “most customer friendly” NFL results in 20 years during the quarter, according to Flutter’s report.
Morgan Stanley shared that Flutter kept to its FY2025 guidance from the company’s Investor Day during September 2024, while “normalizing” for negative US sporting results, such as those seen from the NFL.
While the research firm also stated Flutter could see upside throughout FY2025 in the form of a “rapid” US profit ramp and International growth, the “downside risks” cited in the report include negative regulation or increased competition in the US market, negative regulation in key markets and a “slowdown” in iGaming momentum.
Good to know: Morgan Stanley released its study into Caesars Entertainment’s recent financial results on February 26, believing the sports betting side of Caesars Digital “to be stalling”
Flutter’s implied Q2 2025 guidance includes flat year-over-year growth in adjusted EBITDA, which came off as “potentially conservative” to Morgan Stanley.
“Flutter achieved $156m in Q4 GAAP net income (despite adverse sports results, and non-cash charges for $134m PPA and $212m fair value loss for the Fox Option liability), largely thanks to a tax credit on historic US tax losses, with FY24 GAAP net income of $162m. We see this as constructive regarding potential index inclusion, which is a key stock catalyst,” Morgan Stanley said as part of the report.
For FY2025, Morgan Stanley estimated that Flutter will generate $16.29bn of revenue and an adjusted EBITDA of $2.36bn, $1.28bn of which is projected to come from US operations. The figures would represent increases of 16% and 26% year-over-year, respectively, and Morgan Stanley expects “minimal changes” to forecasts following the official results from March 4.
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