Track market-moving stories before they get noisy

Flutter Entertainment PLC (LSE:FLTR, NYSE:FLUT) is at a potential inflection point as concerns around prediction market competition begin to fade, according to Jefferies analysts, who highlighted improving online sports betting trends and potential new sources of profitability.

Jefferies wrote that the market’s focus on prediction markets cannibalising online sports betting had driven a 65% decline in Flutter’s share price since last summer and contributed to a valuation de-rating from 15 times enterprise value to EBITDA to 8 times.

The analysts argued that the narrative around prediction market disruption is beginning to change, with online sports betting handle growth recovering and limited evidence that prediction markets are taking meaningful share in states where online sports betting is legal.

“The powerful, but misplaced narrative that PMs will cannibalise OSB has started to unravel,” Jefferies wrote, adding that prediction markets could instead provide incremental opportunities for Flutter through market-making activity, FanDuel Predicts and regulatory leverage.

Jefferies identified market-making as the largest potential opportunity, estimating a $340 million annual EBITDA contribution if Flutter captures a 25% share of Kalshi parlays.

The analysts noted that this opportunity is significant compared with Flutter’s $970 million fiscal 2026 US EBITDA guidance, while consensus estimates currently assume no positive contribution from prediction markets and instead reflect around a $300 million investment.

The firm also highlighted potential upside from FanDuel Predicts, which Jefferies estimated could contribute an additional $150 million in EBITDA over the coming years. The analysts also pointed to potential regulatory benefits, including the ability for prediction markets to support broader online sports betting regulation and limit state tax increases.

Jefferies estimated that prediction markets would need to reduce online sports betting handle by around 50% before becoming a net negative for Flutter, given the potential incremental profitability opportunities.

Ahead of Flutter’s Q2 results, Jefferies expects the company could deliver its first US EBITDA beat in a year, improving confidence around the second half of 2026. The analysts forecast Q2 US EBITDA of $126 million, which it said would be 21% above company guidance and 24% above consensus expectations, driven by online sports betting performance and market-making.

A stronger Q2, alongside improved visibility into prediction market opportunities, could help address investor concerns around the expected second-half earnings step-up, Jefferies wrote.

“If FLUT was de-rated for reasons that turn out to be wrong (PM cannibalisation), we would expect a commensurate re-rating as that understanding evolves,” Jefferies wrote.

The analysts added that if prediction markets create incremental total addressable market and profitability opportunities, Flutter could support a higher valuation multiple.

Shares of Flutter traded up 3% at $109 on Tuesday afternoon, down almost 50% so far in the year to date.