In a note on Tuesday, the broker also reiterated its 12,600p target price on the Paddy Power owner, highlighting that if the company’s 58%-owned US business can achieve a 27% market share in the country it could result in earnings (EBITDA) of US$664mln.
READ: Flutter moved to sector perform by RBC following strong share price run, William Hill target cut to Caesars bid price
In a separate note, Peel Hunt revisited its forecasts for other London-listed gambling firms exposed to the US sports betting and online gaming market and concluded that both Ladbrokes owner GVC Holdings PLC (LON:GVC) and 888 Holdings PLC (LON:888) were “undervalued” than previously thought. As a result, Peel Hunt raised its target for GVC to 1,600p from 1,200p and retained a ‘buy’ rating, while 888 was also kept at ‘buy’ while its target was lifted to 350p from 300p.
“It is clear that the US market is growing rapidly, both on a [like-for-like] basis within states, and as a result of new states regulating sports betting and, in some cases, online gaming”, Peel Hunt said, highlighting that despite disruption from coronavirus, gross revenue from the US was up 99% year-on-year in the year to September.
“US sports betting and online gaming gross revenue is growing quickly, and companies with a share of that revenue are attracting high valuations”, the broker continued, although they added that investors will “have to take a lot on trust” as state-level revenue figures were “telling only a partial story about growth, and individual company accounts muddled by investments to drive growth in hope of winning a profitable market share later”.
Shares in Flutter were down 5.8% to 12,610p in mid-morning trading, while GVC rose 1.1% to 987.4p and 888 fell 0.3% to 250.4p.