Flutter stronger than it looks, Jefferies analyst says
Softness of handle for Flutter Entertainment subsidiary FanDuel does not equal cannibalization by prediction markets. That was the thesis of an 8 February investor note by Jefferies Equity Research analyst James Wheatcroft.
Noting that Flutter shares are down 30% in the first five weeks of 2026, Wheatcroft said that was not reflective of Jefferies’ views on the company. He pointed out that fourth-quarter cash flow in the United States was in line with expectations and that overall cash flow was 6% below consensus for 2026.
At Flutter’s upcoming earnings call, Wheatcroft said, he expected management to restate a lack of adverse fiscal effect from prediction markets and confidence in US opportunities, mid-term and long-term. Leadership’s “addressal of these two debates should pave the way for a refocus on attractive fundamentals and valuation.”
The softness in Flutter’s stock price, Wheatcroft contended, was a consequence of weaker handle.
“We continue to see no signs of cannibalization,” he argued, “and see several nonstructural factors as more likely drivers of handle softness.” Those factors were an adverse sports calendar and dramatic promotional cutbacks, among others.
Wheatcroft expected Flutter executives to articulate how they would achieve double-digit growth in gambling revenue and cash flow, despite lower handle. Even low-single-digit handle growth, he argued, would be enough to achieve FanDuel’s 16% growth target. He noted that United Kingdom revenue was up 30% since 2024, although handle remained static.
Even so, the analyst’s expectations for revenue and cash flow were, respectively, 3% and 5% below Flutter’s guidance. He modeled FanDuel revenue to lag 3% but for its US cash flow to be in line with guidance. Internationally, Flutter was projected to be 3% behind guidance in revenue and 7% in cash flow.
Wheatcroft also forecast that FanDuel would achieve a US$30 million savings from the launch of FanDuel Predicts, its event-contracts product. His full-year outlook for the new offering was US$270 million in revenue but US$290 million in negative return on investment.
In international markets, Wheatcroft foresaw an acceleration of revenue, contrasted with unfavorable sports outcomes dampening results in the British Isles. As for the US, he saw “a multiyear growth opportunity … driven by rising population penetration and new state legalizations.”
David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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The Backstory
Setting the stage
Flutter Entertainment’s sharp slide to start 2026 rattled a market primed for steady expansion in U.S. online sports betting. The selloff coincided with slowing handle growth and louder questions about whether prediction markets were siphoning demand. Jefferies analyst James Wheatcroft’s latest view argues the drawdown reflects timing quirks and a tighter promotional backdrop more than structural erosion. That stance builds on months of debate over the durability of FanDuel’s model, the role of in-play products and parlays, and the rising tax friction that is forcing operators to rethink pricing and growth pacing.
The near-term issue is softer handle against strong revenue per bet. Operators have pulled back on free bets, schedules have been less favorable and consumers have shifted to higher-margin, lower-stake wagers. In that context, Flutter’s U.S. cash generation held up better than market sentiment implied, even as investors fixated on headline handle trends. The broader narrative turns on whether these pressures are transitory or a new baseline. Jefferies contends the long-term thesis still rests on product mix, deeper market penetration and disciplined spend rather than raw bet volume.
The earlier bull case and its stress test
Wheatcroft had already framed a multiyear runway for Flutter in a July call that put a Street-high target on the stock. He cited rising population penetration and the potential for new state launches as durable tailwinds and pointed to leadership positions across key international markets to support cash generation and investment capacity. That view acknowledged slowing U.S. handle growth but treated it as a byproduct of a more rational market and evolving products, not a sign of demand decay. For context, see Jefferies’ prior note setting a “strong buy” stance and detailing the shift in investor focus to slower headline handle, the tapering of NFL inventory and softer NBA engagement in late 2024 and early 2025 in Jefferies’ “strong buy” case for Flutter.
The stress test arrived as 2025 wore on. Handle growth cooled across the industry with fewer new-state promos and a consumer pivot toward in-game and parlay formats. Flutter lagged the market’s deceleration at points, fueling skepticism. Yet Jefferies argued those same formats are higher margin, which can sustain revenue and cash flow even when stakes per bet do not rise in tandem. The updated 2026 framing continues that logic by separating optics on handle from fundamentals on revenue mix and unit economics.
Taxes, fees and the new pricing reality
Fiscal pressure intensified with a wave of state-level tax changes, led by Illinois’ progressive levy on handle. FanDuel elected to pass through part of the cost with a 50-cent per-bet fee in the state starting Sept. 1. Jefferies’ David Katz said DraftKings was likely to follow given both operators’ exposure to the top tax tier. He also argued the surcharge should not meaningfully shift share to smaller U.S. operators, though growth in Illinois handle could slow as customers absorb the new fee. Read the mechanics and Jefferies’ sizing of operator cash flow impact in Jefferies’ take on FanDuel’s Illinois user fee.
The Illinois move landed alongside other tax hikes that clipped sector earnings power into late 2025 and 2026. Katz trimmed DraftKings estimates to reflect Illinois, Louisiana, New Jersey and Maryland, and layered in spend for new market launches and a placeholder cost to enter prediction markets. He still held a constructive sector view, citing resilient demand and operating discipline. The reset shows why Jefferies expects operators to emphasize cash flow over raw volume, and why Flutter’s message focuses on margin-friendly products and measured investment despite slower handle growth. For detail on the tax drag and launch costs that are shaping playbooks across operators, see Jefferies’ analysis of higher state taxes and OSB earnings.
Product mix is doing the heavy lifting
Jefferies’ recent survey of U.S. bettors reinforces the idea that product composition, not just total stakes, is driving performance. In-play activity is broad and deep, with most respondents checking odds midgame, considering cash-outs and seeking more proposition markets. Parlays remain popular, which aligns with FanDuel’s emphasis on same-game and multileg bets that deliver healthy margins. The survey found a “barbell” in average handle per player, with growth among lower- and higher-stake bettors, which can support engagement metrics even as headline handle growth decelerates.
That dovetails with Wheatcroft’s argument that even low single-digit handle growth can underpin double-digit gaming revenue and cash flow when the mix skews toward higher-margin formats. It also undercuts the thesis that prediction markets have cannibalized traditional sportsbooks. Jefferies acknowledges competition for wallet share but sees limited evidence of substitution on a scale that would derail the core opportunity. For a read on shifting bettor behavior and why in-play is likely to be a long-term handle and revenue driver, see Jefferies’ survey on in-play and prop betting.
Signals from adjacent markets
While online sports betting navigates taxes and product shifts, social casinos have faced a rough patch. June data showed industrywide declines, with even top publishers giving back gains in key titles. Jefferies flagged competitive pressure from sweepstakes products and the unresolved legal debate around that format. The firm also noted that rising acceptance of real-money igaming in the U.S. could draw spend out of social, though for content leaders that migration could become an earnings uplift given better unit economics in real-money play.
The takeaway for Flutter is indirect but relevant. Internationally, igaming remains a core pillar, and content and product strength can blunt volatility in any one category. If U.S. igaming momentum builds, operators with robust omnichannel content pipelines may be positioned to reallocate investment and capture higher-margin revenue. That strategic flexibility helps explain why Jefferies leans on diversified international cash flow as a buffer while U.S. sports betting mix and pricing evolve. For context on social casino headwinds and the potential igaming offset, see Jefferies’ readout on a “tough month” for social casinos.
What’s at stake next
The immediate catalysts are operator commentary on prediction markets, promo discipline and state-by-state tax pass-throughs. Jefferies expects Flutter to underscore that prediction markets have not dented fundamentals, to detail levers for double-digit revenue and cash flow growth and to frame U.S. upside as a multiyear arc tied to penetration and selective new-state launches. Watch for signals on FanDuel Predicts’ cost savings and how management balances investment in new products against near-term return drag.
The broader stakes run through market structure. If in-play and parlays keep gaining share, operators that scale these experiences while holding the line on promo spending can defend margins even as handle optics stay muted. If tax regimes escalate, expect more transparent fees and sharper cost control. For Flutter, the backstory points to a company betting that mix, product and international diversification will matter more than headline handle in the next leg of growth.
