Flutter Entertainment (NYSE: FLUT) shares increased by 1% today after an analyst stated that the stock could potentially exceed $600 in the next four years, more than doubling its current value. The gaming equity finished at $277.47 today. 

In a client report, Macquarie analyst Chad Beynon began coverage of the FanDuel parent with an “outperform” rating and set a price target of $340, suggesting a potential increase of 22.8% from today’s close. He observed that Flutter satisfies the “elusive” criterion for the software rule of 40, yet investors perceive the company as a gaming stock rather than a software equity.

"FLUT is a rare large-cap stock in the gaming and leisure sector that meets software’s elusive Rule of 40, yet does not trade like one,” wrote Beynon. “Based on Flutter’s current/pending assets, we see a clear line of path for six-year (2024E-30E) revenue/earnings before interest, taxes, depreciation, and amortization (EBITDA) compound annual growth rates (CAGRs) of +12%/21%, fueled by an unrivaled SAM (serviceable addressable market) with a +10% CAGR to $210bn by 2030 and market share gains. If this path is executed on, our calculations show a potential ~$600 share price in a four-year time frame.”

In the software sector, the rule of 40 states that a software-as-a-service (SaaS) provider must achieve a total revenue growth and profit margin percentage of 40%. SaaS is broadly relevant to numerous cloud computing firms. 

Flutter Stock Boasts Strong Competitive Advantages 

Beynon stated that Flutter qualifies as a wide moat stock, indicating it possesses advantages like impressive brand recognition and strong intellectual property (IP) that few rivals can replicate. 

“FLUT benefits from a deep moat (i.e., unique IP, high switching costs, brand loyalty), creating significant barriers to entry. The potential for inorganic growth through strategic mergers and acquisitions and partnerships offer upside not in our forecast,” observed the analyst . “Thus, we believe FLUT is undervalued relative to its intrinsic worth, future growth prospects, and S&P 500 peers.”

The broad evaluation is precise as FanDuel ranks among the leading gaming brands globally, and in the United States, it forms an online sports betting duopoly alongside DraftKings (NASDAQ: DKNG), the other participant. 

Although FanDuel faces numerous competitors, it usually ranks at or near the highest positions in several bettor surveys concerning technology and performs admirably in brand loyalty, suggesting that customers tend to be "sticky" and those who depart frequently come back. FanDuel's advantage is solidified in part by its extensive offerings and technological dominance in same-game parlays, which attract bettors and generate significant profits for operators. 

Flutter Buyouts May Enhance Stock Value 

American investors frequently assess Flutter primarily in relation to FanDuel, but the truth is the company possesses numerous other brands that hold significant market share in regions such as Australia and Europe. 

Dublin-based Flutter attained its leading position via a continuous stream of strategic acquisitions, and although the firm often grabs attention with its deals, investors might not be sufficiently valuing the shares for those acquisitions. 

“Since 2019, FLUT shares have seen a 23% CAGR (vs S&P 500 +16%), attributable to its major leading positions in current (US, UK/Ireland, Australia) and pending (Italy, Brazil) markets, achieved by its proven and replicable M&A strategy (‘Flutter Edge’),” concludes Beynon. “We estimate nine acquisitions since 2019 have created ~$200 of incremental per share value for investors with a long runway from secular trends of digitization and legalization.”