Flutter Entertainment (NYSE: FLUT), parent of FanDuel, is having a rough year. The stock is down 57% year to date. The latest quarterly results didn’t help. The company missed on EPS, cut guidance and announced a CEO change. Shares fell 11% on the print.
But Michael Burry sees a buying opportunity. In a recent Substack post, Burry said he sold DraftKings (DKNG) and loaded up on Flutter, several media reports said.
What Went Wrong in Q2
Revenue rose only 3% year over year, weak for a quarter that included FIFA World Cup matches. Adjusted EBITDA fell 45%. The drop reflects heavy spending on the US prediction market platform FanDuel Predicts, the Arkansas launch, World Cup marketing, among other factors.
Full-year revenue and Adjusted EBITDA guidance was slashed.
Hedge Fund Sentiment
Hedge fund interest in Flutter fell sharply through Q1. Insider Monkey’s proprietary database of over 900 funds shows that only 57 funds held stakes in the stock as of the end of Q1, down from 79 funds a quarter earlier. That drop in smart money conviction lines up with the stock’s steep decline this year.
Interestingly, though, FLUT was part of Harvard University’s stock portfolio earlier this year. Check out more details here.
Michael Burry of Scion Asset Management
The Bull Case
International markets held up. Revenue there grew 4%. US iGaming revenue grew 14%, reflecting FanDuel’s strengthening market share lead in a smaller but more stable business than sportsbook.
FanDuel still owns roughly 41% US sportsbook market share, and DraftKings and FanDuel together control about 78% of the market.
Burry’s thesis is that regulators will eventually crack down on prediction markets like Kalshi, which is running roughly $40 billion in annual volume without paying state gaming taxes. If that happens, Flutter benefits directly. If it doesn’t, Flutter is building FanDuel Predicts to compete anyway.
Flutter trades at 10.14x forward EV/EBITDA and 17.45x forward P/E, roughly in line with the sector median on both. What stands out is the PEG ratio at 0.83, well below the sector median of 1.47, which shows the stock is cheap relative to expected earnings growth.
The Bear Case
The US slowdown could be more than transitory. FanDuel is facing strong competition from DraftKings on the sportsbook side. Prediction markets keep eating into betting volume. UK gaming taxes are taking a toll. The company has a new CEO now. Any leadership transition adds execution risk.
While we acknowledge the risk and potential of FLUT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FLUT and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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