Why Is the Flutter Entertainment share price falling?

Motley Fool contributor Chris MacDonald discusses why Flutter Entertainment shares are on his watch list as a speculative buy right now.

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Today’s market is filled with investors such as me looking for good deals. However, some stocks seem to never go on sale. Looking at the recent drop in the Flutter Entertainment (LSE:FLTR) share price, this recent dip is looking attractive to me right now.

UK-based online and mobile sports-betting purveyor Flutter Entertainment was riding high earlier this year. Indeed, Flutter Entertainment shares rose dramatically from a low of around 6,500p in 2020 to nearly double to current levels. Yet on a year-over-year basis, Flutter Entertainment shares have remained somewhat stagnant. Thus, this stock is one that’s proven even more difficult to time than most.

However, over the longer term, Flutter Entertainment shares have proven to be a solid growth bet. Trading around 350p 20 years ago, this stock has provided serious long-term growth in buy and hold portfolios. As I’m looking for a great long-term hold for my portfolio, this is a stock that’s been picked up on my screener of late.

US market key catalyst for Flutter Entertainment shares

Flutter Entertainment is a UK-based company operating a number of high-profile banners around the globe. Investors may be familiar with the company’s PokerStars, Sky Betting, and FOX Bet banners, among various others. Flutter Entertainment’s operations span the UK, Ireland, Australia, and the US. Accordingly, this is a true international play on the broader online gambling space. 

However, the US market is among the most lucrative in the world. And in this market, Flutter Entertainment is making a name for itself. The company’s FOX Bet platform has been expanding, along with loosening restrictions on online gaming in America. A high-profile partnership with Paysafe was expanded, as were the company’s growth prospects in this key market.

However, Flutter Entertainment appears to have stalled of late. Since hitting a high of nearly 20,000p in March, shares have declined approximately 30%. 

In my view, there’s not much reason for this sell-off. Sure, inflation concerns have spurred volatility in interest rates. And growth stocks have increasingly been pushed aside in favour of safer, more defensive shares of late. That I can understand. 

However, Flutter Entertainment shares certainly look to me like ones with value right now — I’m always on the lookout for growth at a reasonable price for my portfolio. The company’s currently growing revenues at a triple-digit pace. On a forward-looking basis, analysts still expect near-50% growth rates moving forward. On a price-to-sales basis, this stock is trading around 3.7-times currently. That’s not bad.

Bottom line

Flutter Entertainment shares have really underperformed over the past year, relative to their historical performance. There are many reasons for this, including how investors feel about the ethics of online sports betting.

However, Flutter Entertainment is one such company that’s currently profitable. I think that matters. In fact, I think that’s a hugely important aspect to consider. Growth is great, but unprofitable growth is something that’s hard to get behind. With gross margins in the 65% range, Flutter Entertainment shares provide plenty of operating leverage.

This company simply checks too many boxes for me to ignore. Accordingly, I’m taking a hard look at this stock right now and considering it as a speculative buy for my portfolio. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool UK owns shares of and has recommended Flutter Entertainment and Flutter Entertainment PLC. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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