Jim Cramer on Flutter: "It's Too Dangerous to Stick Your Neck Out for This One"

Flutter Entertainment plc (NYSE:

) is one of the . During the episode, Cramer noted the company’s losing market share as he stated:

When you listen to the conference call commentary, there’s some crazy stuff happening here. All last year, we heard that the online sportsbooks were suffering because the clients won too much. You can understand why that’s a problem for Flutter’s FanDuel. But this time, we heard that the clients lost too much. And it turns out that’s also a problem because of a new gambling term that, frankly, it’s new to me. It’s called recycling… I think it’s much easier to walk away now that people have many more alternatives. That’s what I think matters…

Looking forward, I’m willing to entertain the idea that people have gotten too negative on Flutter stock. The company’s still growing, it’s still profitable, and its shares are starting to look pretty darn cheap. It sells at 12 and a half times this year’s earnings estimates and less than nine times next year’s numbers… At the end of the day, Flutter’s latest quarter didn’t do a thing to change the narrative that they’re losing share to the prediction markets. While Flutter denied that the prediction markets are a serious problem, they confirm that they’re losing share to somebody. Of course, management said it wasn’t because of the prediction markets. Instead, they pointed to a vague issue with that generosity playbook.

But why should anyone believe them? So, unfortunately, I don’t see what breaks Flutter out of its current downtrend other than the stock simply becoming too cheap to ignore. But that’s a dangerous game because if the company continues to lose market share, then those earnings estimates might prove to be too high, and when the actual numbers come out, the stock will turn out to be more expensive than it seemed. It sure feels like that’s going to be the case.

Bottom line here: The stocks of the main online sportsbooks have been getting killed for months as Wall Street bet that the online prediction market would eat them alive. So far, those fears have been mostly theoretical, but last night’s quarter from Flutter was simply not strong enough to dispel those concerns. In fact, they confirmed that they’re losing market share, so this stock got crushed again. Even if you want to go bottom fishing here, I say don’t cast your line until these guys come to grips with the fact that the prediction markets are the real problem. As long as they’re in denial about that, it’s too dangerous to stick your neck out for this one.

Photo by jason briscoe on Unsplash

Flutter Entertainment plc (NYSE:FLUT) operates sports betting and online gaming services under well-known brands such as FanDuel, PokerStars, Betfair, Paddy Power, Sisal, and others.

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