We recently compiled a list of the 10 Best Casino Stocks To Buy According to Analysts. In this article, we are going to take a look at where Flutter Entertainment plc (NYSE:FLUT) stands against the other casino stocks.
A Quick Recap of the Global Gambling Industry
The world has seen a rapid growth in online gambling recently, which is fueled by the legalization of sports betting around in many countries. The United States ban on sports betting was lifted in 2018 since then many states have moved to allow such activities online as well.
Makers of FanDuel and BetMGM have flooded the United States market with promotional content and advertising targeted at sports fans, encouraging them to participate in their fantasy leagues. Sports betting companies use various marketing techniques to cash in the sports seasons. In one of the BetMGM promotions, its brand ambassador Jamie Foxx, a movie star, encouraged sports fans to try betting on various outcomes in the game.
The advertisements have been working well to drive revenue for the companies. As per the American Gaming Association, in 2023, online sports bookmakers took more than $114 billion in Bets. Moreover, the US revenue from online sports betting reached around $16.9 billion during the same year.
After the United States, many other countries are working on building casinos to attract foreign tourism. As per a CNBC report on September 1, Thailand after Singapore and Macau is looking to develop casinos in the country. The strategy worked well for Macau as it overtook the title of the world’s largest gambling hub from Las Vegas. Singapore has been reaping the benefits as well from its two 14-year-old casinos. Thailand has now joined the race, and it is expected that the country will give tough competition to both Macau and Singapore. Its casinos are expected to generate $5 billion in revenue, which is 1% of the country’s GDP.
In one of our recent articles titled, 7 Best Small-Cap Casino Stocks Hedge Funds Are Buying, we found that Asia Pacific is one of the major contributors to the global betting industry. Here’s an excerpt from the piece:
“Legalization of gambling, rapid urbanization, increased use of social media, and rising internet penetration rate are factors driving market growth. As per the report, the Asia Pacific region is the main contributor in the global betting industry accounting for more than 32.4% of the total market valuation. The Asia Pacific region is followed by North America and Europe. Looking ahead, South America and Africa are expected to be the next hot markets for gambling and casino companies. The South American region is expected to grow at a CAGR of 23.4%, whereas Africa is expected to grow at 8%. Rapid legalization and increasing disposable income in these regions contribute to the growth.
If we look at the segment-wise analysis, the lotteries segment accounts for more than 53% of the total market value and is expected to grow at the fastest rate during the forecasted period.”
Are Sports Betting Stocks Slipping Due to the Upcoming Tax?
Illinois lawmakers are drafting a new budget that includes a sharp increase to the state tax on sports betting operators. On May 28, CNBC’s reporter Contessa Brewer mentioned that operators in Illinois have paid 15% on sports betting since it went live in June 2021. The new tax proposal is expected to increase the tax to a range of 20% to 40% depending on gross receipts. Meaning that the largest betting operators are expected to be attacked the highest with this increase.
The law is yet to be passed, but if it gets approved it will make Illinois’ highest tax rate the second highest behind New York and New Hampshire. For context, Illinois is the 4th largest state for sports betting and betters waggered more than $1.2 billion in March 2024 alone. Sports betting associations are not happy with the tax proposal. The CEO of one of the largest sports betting operators in the United States mentioned that the burden of this tax is going to shit to the consumers.
Now that we have looked at the overall gambling and casino industry. Let’s talk about the 10 best casino stocks to buy according to analysts.
Our Methodology
We used the Finviz stock screener to come up with stocks operating in the gambling and casino industry. First, we aggregated a list of casino stocks that were most widely held by hedge funds in Q2 2024. Next, we ranked them based on the average price target upside as per Wall Street analysts. The list is ranked in ascending order of the average price target upside as of September 1.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A digital kiosk showing the diverse range of sports betting options available.
Flutter Entertainment plc (NYSE:FLUT)
Average Price Target Upside as of September 1: 17.04%
Number of Hedge Fund Holders: 53
Flutter Entertainment plc (NYSE:FLUT) is a major international betting and gambling company. It provides various online platforms where people can place sports bets, play casino games, and other gambling-related activities.
The company operates in Australia, the United States, the United Kingdom, and Ireland. Flutter Entertainment plc (NYSE:FLUT) manages FanDuel, one of the most renowned online sports betting platforms in the United States, along with other gambling sites including Betfair, Sportsbet, and Sky Betting and Gambling.
As per the company’s FQ2 2024 factsheet, Flutter Entertainment plc (NYSE:FLUT) captured 40% market share in the United States through its FanDuel platform. The company reached 14.3 million average monthly players during the quarter indicating a 17% increase since the previous year.
An increase in market share and more players using the company’s platform resulted in a successful financial quarter, with revenue increasing 20% year-over-year to reach $3.2 billion. Moreover, the company has also increased its revenue guidance for 2024 and now expects to generate $6.2 billion with $740 million in adjusted EBITDA.
Hedge funds find Flutter Entertainment plc (NYSE:FLUT) profitable and have increased their stake in the company. It was held by 53 hedge funds in Q2 2024, up from 21 hedge funds during the last quarter. The total hedge funds positions for the second quarter amounted to $1.72 billion.
The increasing market share of the company provides it with a strategic edge over its competitors. Moreover, the company expects that the total addressable market will reach $40 billion by 2030 and expects its market share to grow with it. Its past decade’s performance advocates for its capacity to grow with the market. Over the past 10 years, Flutter Entertainment plc (NYSE:FLUT) has grown its top line and levered free cash flow by 32%.
Wall Street analysts are also bullish on the stock. 24 analysts have a consensus Buy rating for FLUT, with their 12-month median price target of $248.61 presenting an upside of 17% from the current level.
Overall FLUT ranks 10th on our list of the best casino stocks to buy. While we acknowledge the potential of FLUT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.