Flutter shares surge on US potential ahead of NYSE debut

(Sharecast News) - Shares in Paddy Power and Betfair owner Flutter Entertainment jumped by over a tenth on Thursday despite fourth-quarter revenues coming in below guidance, with investors showing optimism about the company's planned listing on Wall Street with significant potential for growth in the key US market. The company, which runs FanDuel, the biggest sportsbook in the US with 43% gross revenue market share, announced that it expects to debut on the New York Stock Exchange on 29 January, and is finalising its registration with the US Securities and Exchange Commission.

The company revealed that fourth-quarter US revenues were up 26% year-on-year, partially offset by a net revenue margin decline of 150 basis points to 7% due to adverse sporting results and higher promotional activity.

Flutter paid out $343m due to "customer friendly sports results" in the fourth quarter, which limited US gross revenues to $1.42bn (£1.14bn), some $225m below previous guidance provided at its third-quarter results in November.

Excluding US operations, however, fourth-quarter results were in line with guidance, with UK and Ireland revenues up 19%, Australia down 2% and international revenues up 4%.

Flutter said group revenues in the final three months of 2023 rose 11% year-on-year to £2.67bn, up from 8% in the third quarter but significantly below the 42% surge seen in the first half. As a result, full-year sales rose by 24% to £9.51bn.

"While sports results were very customer friendly, particularly on the NFL in November, the underlying momentum in the business remains very strong heading into 2024," said chief executive Peter Jackson. "Outside of the US, the quarter traded in line with expectations, with continued strong momentum in the UK&I supported by recent product enhancements and International growth driven by our 'Consolidate and Invest' markets."

Commenting on the share-price reaction on Thursday, AJ Bell investment director Russ Mould said excitement about the NYSE debut and commentary around continued momentum in the business "allowed investors to look past a hit from customer-friendly sporting results in the US".

"The hope will be the company, whose strategy is heavily oriented to capitalising on an emerging opportunity in the US, can attract a higher valuation off the back of its US listing. The legalisation of sports betting across much of the US has created a huge new market which many UK bookmakers are looking to tap into, to varying degrees of success," Mould said.

"Flutter has done this as effectively as any of them and its FanDuel business is enjoying particularly eye-catching growth."