Flutter EntertainmentFLUT

Citi upgraded its rating on the company to neutral, a move that suggests they no longer believe the stock is likely to fall further. The change comes after the share price dropped about 13 percent following the company's second-quarter results.

Analysts at Citi noted that the recent sell-off has brought the stock to a more reasonable price. While a neutral rating is not a full endorsement to buy, it signals that the worst of the recent price slide may be over as the market finishes reacting to the company's latest financial update and leadership changes.

Source: Proactive Investors - Finance

Key highlights

• Full year outlook lowered: Management cut its total revenue forecast by $395 million to a new midpoint of $17.91 billion, largely because the company is shifting from focusing on profit margins to spending more on winning and keeping customers. This shift, combined with a one week delay to the NFL season, is expected to reduce full year adjusted EBITDA, which is a measure of profit that excludes certain costs, to $2.655 billion.
• Leadership change announced: Peter Jackson will step down as CEO on October 1, 2026, after nine years leading the company's expansion from a UK business into a global gambling giant. He will be succeeded by Dan Taylor, who currently leads the company's international division and has worked closely with Jackson for several years.
• US sports results drag: US revenue fell 6% to $1.68 billion as unlucky sports results for the house reduced the amount of money the company kept from bets by 70 basis points, or 0.7%, compared to a year ago. Despite the revenue dip, the number of people playing every month in the US grew 9% to 3.8 million, suggesting the business is still attracting more users even when game results favor the bettors.
• New cost cutting plan: The company launched a second phase of its efficiency program aiming for $500 million in yearly savings by 2029 by using AI and simplifying its technology across different countries. These savings are meant to offset rising taxes, like the recent UK gaming tax increase that jumped from 21% to 40% in April.
• International growth through acquisitions: International revenue rose 10% to $2.64 billion, though much of this came from buying businesses in Italy and Brazil. When excluding these deals, organic revenue grew 4%, showing that the company's existing international brands are growing more slowly than the overall group.

Our take: A soft quarter that shows the high cost of defending a lead. While user growth is healthy, the need to aggressively reinvest in the US and the lower profit guidance suggest the path to high margins will be longer than expected. The core business remains strong, but this transition period chips away at the near-term bull case.