Published on: January 7, 2025, 05:22h.
Last updated on: January 7, 2025, 05:22h.
Shares of Flutter Entertainment (NYSE: FLUT) traded lower by nearly 2% in Tuesday’s after-hours session after the FanDuel parent lowered its 2024 earnings and revenue guidance, citing unusually weak results on NFL wagers.
The company stated it now anticipates 2024 revenue of $5.78 billion, down from a previous estimate of $6.05 billion to $6.25 billion. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are projected to be $205 million lower than the earlier midpoint of $505 million. For the fourth quarter, the operator foresees EBITDA of $161 million on sales of $1.59 billion, facing challenges in the October through December period.
The 2024/2025 NFL season so far has been the most customer-friendly since the inception of online sports betting with the highest rate of favorites winning in almost 20 years,” as per Flutter.
The NFL is the most popular league for betting in the US. Most casual bettors tend to bet on favorites rather than underdogs. As of Dec. 31, 2024, NFL favorites won 71.8% of games this season, marking the highest percentage in nearly 20 years, according to ESPN data. Through week 17, NFL “chalk” covered the spread at an almost 54% rate – the highest level since 2017 and the seventh-highest in the Super Bowl era, reported ESPN.
Flutter Warning Has Implications
Flutter informing investors about what could be a challenging fourth quarter may have repercussions across the gaming equities landscape as it is likely that other operators besides FanDuel are also affected by the high number of NFL favorites winning.
When giving third-quarter earnings reports, sportsbook operators mentioned to analysts and investors that the football season started rough, but they expected the bettors’ winning streak to fade as the season progressed. However, that did not happen, and it seems that Flutter is not the only company facing this situation.
In after-hours trading, DraftKings (NASDAQ: DKNG) — a close competitor of FanDuel — dropped by almost 1%, while other sports wagering-related stocks rose, including ESPN Bet parent Penn Entertainment (NASDAQ: PENN) and Rush Street Interactive (NYSE: RSI). Flutter is the first sportsbook operator to provide an update on the fourth quarter. BetMGM is set to announce 2024 results on Feb. 4.
Although the fourth-quarter update could impact Flutter in the short term, the company is actively buying back its stock, suggesting that there may be some support for the shares despite the revised guidance. The operator aims to repurchase at least $350 million worth of its shares by the end of the current quarter.
Flutter Long-Term Outlook Still Positive
Flutter stated that the results observed during the 2024 NFL season are “transitory” and do not affect the long-term outlook provided by the company at its investor day last September.
At that time, the Betfair parent projected the total addressable market for regulated global gross gaming revenue (GGR) to reach $368 billion by 2030, representing a compound annual growth rate (CAGR) of 8%. With respect to its 2027 US and rest of the world (ROW) guidance, Flutter forecasted 2027 revenue of $21 billion at the midpoint, indicating a three-year CAGR of 14%.
Due to its significant presence in Australia and Europe, Flutter has avenues to counter occasional headwinds originating from the US, such as a high percentage of NFL favorites covering the spread.
“In the Group Ex-US, continued good momentum in UK/Ireland in particular with favorable sports results in the English Premier League, means we now estimate 2024 revenue and adjusted EBITDA will be approximately 1% and 2% higher than the mid-points of our previous guidance provided at Q3,” added the operator.