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By arguably most measures, gaming juggernaut Flutter Entertainment (FLUT)—perhaps best known for its market-leading U.S. brand FanDuel—represents a risky venture. As exciting as sports betting is, the underlying economy suffers from significant challenges. That’s not great for consumer sentiment, which could easily weigh on this Wall St. darling with a unanimous buy rating from 20 different analysts. Nevertheless, nuanced data points suggest that the contrarian argument could win out. Therefore, I am bullish on Flutter.
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Solid Fundamentals Build the Case for FLUT Stock
To be blunt, investors have no shortage of concerns to consider, from the Trump administration’s tariffs and subsequent trade wars to the blistering surge in gold prices. Essentially, this framework implies that consumers are reducing their discretionary spending. Such a backdrop naturally bodes poorly for enterprises like Flutter.
Nevertheless, management is issuing a different narrative: “Historically, our business has been very strong in the face of challenges from a consumer economics perspective, so we’ve always been quite defensive from that perspective,” Flutter CEO Peter Jackson told Reuters in an interview. “We’re a growth business. I think that even in the face of these sorts of macro and global challenges, the business will continue progressing,” Jackson emphasized.
Of course, as the head executive of a major publicly traded company, one would expect a positive framing of the underlying business. However, the difference between Jackson’s conviction and the typical corporate cheerleading is the data. Profit margins are climbing.
It’s generally known that gambling expenditures enjoy growth during economic expansions but stagnate during recessions. Interestingly, though, an April 2024 report by The City University of New York revealed that despite Americans feeling glum about the economy, their gambling behaviors belie their beliefs.
Per the research, “[c]onsumer sentiment reached a record low in July 2022, and while it has improved somewhat since then, it is still nowhere near its pre-pandemic level. Yet gambling has surged. Spending on sports betting went up almost 50% since last year, and spending in casinos and on lottery tickets went up nearly 10%.”
The underlying economy may actually be stronger than it appears. Until the willingness to spend on discretionary pleasures like gambling noticeably fades, FLUT stock may be an opportunity when it encounters volatility. Apparently, management isn’t seeing gambling trends diminish — quite the opposite.