Prediction Market Fears Fade at Flutter, Opening Re-Rating Window

What happened

Flutter's shares have plunged 65% from their 2025 peak, compressing its EV/EBITDA multiple from 15x to 8x, driven largely by fears that prediction markets would cannibalize its core sports betting business, according to Jefferies. The brokerage now says those worries are easing, pointing to improving online sports betting trends and new profit opportunities that could mark an inflection point. The DeepValue master report had already flagged Flutter as a 'Potential Buy' at $174, arguing that the market was ascribing minimal value to over $1.5 billion in annual international EBITDA. While 2025's earnings volatility from adverse sports results and UK tax hikes bruised confidence, FanDuel's U.S. market leadership and growing iGaming business provide a resilient base. With prediction-market anxiety fading and a valuation at just 8x EBITDA, the stock may finally be positioned for a sentiment-driven recovery.

Implication

Jefferies' call suggests the market may have over-penalized Flutter for a prediction-market threat that now appears manageable, compressing its multiple well below historical averages. This opens a window for re-rating if Flutter can demonstrate improving online sports betting momentum and effective cost mitigation against UK tax hikes. However, investors must still monitor U.S. sportsbook share trends, the rollout of FanDuel Predicts, and regulatory developments, as these remain key swing factors. The stock's risk/reward looks asymmetrically favorable at 8x EBITDA, but patience is required given the long road to rebuilding earnings credibility. A sustained recovery likely hinges on management executing tangible beats in upcoming quarters rather than simply benefiting from a less fearful narrative.

Thesis delta

The Jefferies note diminishes a key bear case—that prediction markets would structurally erode sports betting—which had been a major driver of Flutter's valuation compression. While our base thesis already viewed FanDuel Predicts as a hedge rather than a core threat, this external validation reduces uncertainty and strengthens the case for a re-rating if fundamental execution improves.