Hello Regards,
I know you all enjoy gambling so perhaps this may be interesting to you. FLUT, the parent company of FanDuel and a global casino operator, pulls in 17B annual revenue growing 15% YoY on 42% gross margin and now trades at a 16.8B market cap. The stock is down 55% ytd after they missed on EPS, got a new CEO, and sentiment reversed after the rise of the prediction markets. However they are expanding into the prediction market space with FanDuel Predicts, have a dominant US sportsbook market position over DKNG, which is also down 29% YTD, yet still trades at 2x P/S on only 6B annualized revenue. I don’t understand how a smaller inferior company can command a higher multiple if both businesses face the same external threat and bear case, and why a growing business with healthy margins is priced like a dying one with a sub 1x multiple. To me it is clear that the gambling TAM pie is growing as more gamblers are converted with ads and convenience of the prediction markets, yet the stock market is treating this as a zero-sum war as if prediction markets cleanly steal revenue. As a gambler myself, I use both sports books and prediction markets. Needless to say, FLUT authorized a 5B stock buyback, and also, our favorite regard Michael Burry is long. Burry aside, this company traded 2-3x P/S just last year and is now sub 1x despite continued revenue growth. My thought, if you had 17B in cash, wouldn’t owning a global casino that prints money like this be the most obvious buy? My position is 135Cs expiring 1/21/2028.