The Flutter Entertainment share price is having a bad year, a situation that may worsen after the latest UK budget by Rachel Reeves. Its UK shares were trading at 15,125p on Thursday, down by 35% from the year-to-date high.
Flutter Entertainment faces a £500 million headwind
Flutter, the parent company of Fanduel, Sky Betting, Paddy Power, Sisal, and Betfair, has come under pressure this year as signs of slow growth emerge. Its retreat has mirrored that of DraftKings, whose stock has dived by 40% from the highest point this year.
Flutter Entertainment is now dealing with another major headwind after Rachel Reeves boosted taxes in the industry. She boosted the remote gaming duty that is levied on online casinos from 21% to 40% starting from next April. Online betting levies will soar from 15% to 25%.
Reeves believes that the new duties will raise £1.1 billion a year in taxes, a move that will affect the profitability of these companies. Flutter, as the biggest company in the industry, will suffer the most, with analysts pricing in a £500 million hit in its profits. Entertain, another top company in the industry, will suffer a £150 million hit.
Revenue growth has slowed
The new taxes on the industry come at a time when growth in the industry has slowed after the pandemic boom. The most recent results showed that its revenue rose by 9% in the third quarter to $3.7 billion. Most of this revenue was driven by its iGaming revenue, which rose by 44%.
Flutter’s Sportsbook revenue dropped by 5% as competition soared in the United States. The management blamed this situation to the uneconomic generosity from its competitors like DraftKings in the US.
Flutter made a giant loss of $789 million because of its woes in India and the $205 million it paid to Boyd to revise its US terms.
The management expects that its revenue will be $16.69 billion this year, with an adjusted EBITDA of $2.9 billion. Its forward guidance was lower than what it had predicted as the management included the negative impact on Illinois’s wager tax and India’s regulatory change. The CEO said:
“Our diversified portfolio and disciplined approach give me great confidence in our ability to lead the industry and increase long-term value for shareholders.”
The company is betting on the booming prediction market for growth. It will launch the FanDuel Predicts product in December as it seeks to compete with companies like Polymarket and Kalshi. However, the risk is that the industry has become highly saturated.
Flutter share price analysis
FLUT stock chart | Source: TradingView
The daily timeframe chart shows that the Flutter stock price has been in a strong downtrend in the past few months. Its crash coincided with the ongoing headwinds, including its woes in India and the United States.
Flutter Entertainment stock has recently formed a death cross pattern as the 50-day and 200-day moving averages crossed each other on October 27.
The stock is now slowly forming a bearish flag pattern, which is made up of a vertical line and a rectangle channel. Worse, this channel is part of the inverse cup-and-handle pattern, a common continuation sign.
Therefore, the most likely scenario is where the stock continues falling, as investors target the key psychological point at 10p.
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