Flutter Entertainment (LSE:FLTR) has struggled over the past couple of months. This has been reflected in a downward move in the share price. Even though the shares are down around 26% over one year, most of this move (24% of it) has come in just the past three months. Yet with a potentially promising outlook for next year, I think that Flutter Entertainment shares could be a good discount buy for me right now.
Short-term struggles
It hasn’t been easy going for Flutter of late. Q3 results released in early November did show some good growth, but it also saw the business cut its full-year guidance.
For example, adjusted EBITDA was cut from previous projections of £1.27bn-£1.37bn to £1.24bn-£1.28bn for the group, excluding the US. In the US, Flutter now expects a loss for the year at the higher end of the previous guidance. It spoke of unfavourable sports results as a key factor in October that contributed to this revision lower in numbers for the year.
Aside from the numbers, Flutter Entertainment shares also fell as a large number of MPs have been lobbying for a review of gambling laws in the UK. In late November, an open letter was submitted by MPs to push for more stringent limits as more than 55,000 children (11-16 year olds) are now claimed to be gambling addicts.
Any tightening of restrictions would mean a revenue negative hit for Flutter, so the shares dropped on this news.
Reasons to be positive
The above points have pushed Flutter Entertainment shares down over the past quarter. But I think that they’re starting to be attractively priced. I note the concerns raised above as potential risks, but I do also see plenty of reasons to be positive.
For example, the business recently said it’s buying online bingo operator Tombola for £402m. This deal is expected to complete in Q1/Q2 next year. I think this is a smart move as it gives Flutter a more diversified range of companies within the group. With PaddyPower and BetFair concentrating on the sports market, having a more traditional casino company should help to spread risk. After all, with negative sports results being flagged in the Q3 report, Tombola revenues should help to balance this out if issues are still there in 2022.
Another reason why I think Flutter Entertainment shares could do well next year is continued growth in the US. In the most recent results, US revenue for the first nine months of the year was up 85% versus 2020. America is a huge and potentially lucrative market for the firm. If Flutter can continue with the current strategy, then I’d expect this growth to continue next year.
Overall, I think that the recent dip in the share price represents a good opportunity for me to buy. I’m considering doing so at the moment. There are risks around recent results and potential restrictions. But I feel the potential rewards from the US and new acquisitions should outweigh these.
