Flutter’s Stock Rise Attracts Investors Despite Illinois Sports Wagering Tax Hike

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Flutter Entertainment, traded under the ticker FLUT on the New York Stock Exchange, saw a modest but promising uptick in its stock value on Monday. This was hot on the heels of higher-profile research firm, Hedgeye, identifying Flutter as a lucrative long-term investment option.

This development caught the attention of numerous investors and business analysts, including Sean Jenkins. As an expert analyst, Jenkins issued a note to investors, defining the robust duopoly of Flutter and competitor DraftKings, with the index DKNG, as a compelling reason to consider investments in both these gaming stocks.

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The gaming industry continues to pick up speed as it matures, and both FLUT and DKNG have built an indisputable lead with solid command over the market. Jenkins observed that the gaming industry’s direction suggests an increasingly strong justification for investing in both companies.

Flutter, the parent company to FanDuel, has seen its shares prosper, with a year-to-date value increase by 10.53%. Meanwhile, DraftKings has enjoyed a rise of 6.33%. However, DraftKings stock has taken a knock in the last three months, largely the result of Illinois’ decision to impose a staggered tax rate on the sports wagering industry.

This recently introduced tax arrangement hits larger players like FanDuel and DraftKings hard, compelling them to pay significantly more in state taxes compared to smaller competitors. For these two industry titans, this could effectively double the amount they owe in taxes in Illinois.

Despite the recent downturn for gaming stocks in the second quarter due to Illinois’ heightened tax regime, other states with significant sports betting haven’t followed suit. However, there are fears that these states, starved for cash, might consider implementing similar tax rules. Analysts, however, believe that this risk, or at the very least, the Illinois setback, has already been factored into gaming stock prices. Jetkins advised investors to view DraftKings and Flutter through the lens of second-half and long-term perspectives rather than put undue emphasis on second-quarter performances.

New York, the most populous state with an operational sports betting market, operates under a 51% sports wagering tax — the highest nationwide. Still, this hefty taxation hasn’t deterred sportsbook operators, with FanDuel and DraftKings ruling the roost in this highly contested market.

A recent report by David Katz, a Jefferies analyst, revealed that in the critical and rapidly growing New York market, Flutter, through its subsidiary FanDuel, was holding a substantial lead in terms of market share at 47%, against DraftKings’ 36%. This is despite DraftKings’ notable 45% growth rate outstripping Flutter’s 27%. Katz construed that investors see potential in Flutter as a worthy bet in New York and collectively identified both Flutter and DraftKings as top prospects to watch.