Flutter Entertainment (LSE:FLTR) shares have tumbled in the past few months. Despite that, I believe it is a FTSE 100 bargain at current levels and I would buy shares for my holdings!
Why the shares fell
It’s no secret that the rise of ethical investing has shone a spotlight on gambling firms such as Flutter Entertainment. In fact, in some instances, it has contributed to the share prices being detrimentally impacted. In addition to this, gambling stocks are often viewed as growth shares. Rising interest rates have meant investors are looking at defensive stocks to bolster their holdings. This has also caused issues for firms like Flutter Entertainment.
As I write, shares in Flutter Entertainment are trading for 11,175p per share. At this time last year, shares were trading for 14,480p, which is a 29% drop over a 12-month period. The shares have dipped to current levels from as high as 16,915p in March, which is a 35% drop. Despite all this, I am still bullish on Flutter Entertainment shares.
FTSE 100 bargain
Gambling is a huge growth market and the pandemic saw many new customers sign up throughout Flutter’s different platforms. Although Flutter Entertainment itself may not be a household name, a lot of its brands are instantly recognisable. These include PaddyPower, Betfair, FanDuel, Sky Betting and Gaming and many more. Flutter currently has 14m active customers in 100 different markets supported by 14,000 employees. It is a global powerhouse. It also provides betting technology and software to other firms as another revenue stream.
One reason I particularly like Flutter is its propensity to grow and expand. It usually does this by acquisitions. For example, Flutter purchased a controlling stake in US fantasy sports company FanDuel. It has since grown to become one of the largest fantasy sports players in the US. Furthermore, Flutter recently purchased Tombola, an online bingo platform for £402m. These acquisitions give Flutter access to new customers and markets and can boost revenue.
Flutter’s performance has been positive in recent times. I do understand that past performance is not a guarantee of the future, however. Looking back I can see that revenue and operating profit have increased each year for the past four years.
FTSE 100 stocks have risks
Two main risks stand out for me that could affect Flutter shares and any potential returns. Firstly, the recent spotlight on gambling laws, especially here in the UK, highlighted by the discussions in parliament, could affect Flutter’s ability to operate and affect revenues and investor sentiment. This has already happened in the Netherlands and Flutter exited that market. Next, competition in most growth markets is intense and gambling and gaming is no different. All firms are vying for new customer sign ups and for these customers to spend their hard-earned cash on their respective platforms.
Overall I think Flutter is one of the best FTSE 100 stocks for me to buy right now. It has a huge operation and access to many different markets via its multitude of well-known brands. Flutter recognises opportunities to expand and strategically acquires brands and firms that can enhance its offering. Despite recent share price issues, I still think it would be a good addition to my portfolio and I would add shares at current levels which are cheaper than usual.
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Jabran Khan has no position in any of the shares mentioned. 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.
