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- Flutter Entertainment (FLUT) gained more than 3% pre-market on Wednesday after Citi raised it to Buy from Neutral.
- Citi sees the selloff over Brazil and September U.S. sports results as overdone, and expects a third-quarter upside surprise.
- Brazil's betting ban would cost Flutter about $70 million of 2026 revenue and $20 million of adjusted EBITDA if it lasts to year-end.
Flutter Entertainment stock rose over 3% pre-market after Citi upgraded FLUT to Buy, calling the Brazil and September U.S. sports results selloff overdone.
Lead
Flutter Entertainment (NYSE: FLUT) rose more than 3% in pre-market trading on October 7 after Citigroup (C) upgraded the stock to Buy from Neutral. Citi argued that the market overreacted to two near-term pressures: regulatory uncertainty in Brazil and a run of customer-friendly U.S. sports results in September. Shares had been trading near $75, close to a 52-week low and roughly 69% below their level a year earlier.Why Did Citi Upgrade Flutter Entertainment?
Citi upgraded Flutter because it expects third-quarter results to break a four-quarter streak of underperformance against forecasts. The bank projects U.S. handle, the total amount wagered, to grow about 13.5% year over year, helped by the NFL season and the World Cup. It also expects gross margin to improve to about 40%.
The rating change follows a difficult year. Second-quarter adjusted EBITDA fell 45% as customer-friendly sports results, higher U.K. gaming taxes and spending on prediction markets and World Cup marketing weighed on profit. Flutter has since lowered the midpoint of its 2026 U.S. adjusted EBITDA guidance by 22%. Citi's view is that the recent share price weakness already reflects those setbacks.
What Does the Brazil Ban Mean for Flutter?
Brazil's ban is a limited near-term earnings hit with an uncertain end date. A provisional executive order in late September suspended online sports betting and iGaming in the country, and Flutter stopped operating there to comply.
If the ban lasts through year-end, Flutter expects a revenue shortfall of about $70 million and a $20 million reduction in 2026 adjusted EBITDA. The order needs Congressional approval or amendment within 120 days to stay in force. If Congress rejects it, Flutter expects its Brazilian online sports betting and iGaming activity to resume. For a group of Flutter's scale, the quantified impact is small next to the share price decline, which is the basis for Citi's overreaction argument.
How Do September Sports Results Affect Earnings?
Sports results affect earnings because sportsbook margins depend on game outcomes. When favorites win and bettors collect more than expected, the operator's hold, the share of wagers it keeps as revenue, falls. September's run of outcomes favored customers, which prompted fears of another weak quarter at FanDuel, Flutter's U.S. business.
Such variance tends to reverse over larger samples of events. Citi's forecast of a margin recovery in the third quarter rests on that assumption, along with continued handle growth during the NFL season.
Market Reaction
The pre-market gain recovered only part of the recent slide. The stock fell sharply after the Brazil announcement and had already come under pressure from repeated guidance cuts this year. Flutter's market capitalization stood near $13 billion before the upgrade.
Other brokers have been more cautious. Rothschild & Co downgraded the shares to Neutral in September after the latest guidance reduction. The split shows how far opinion on the sector has diverged over U.S. profitability and promotional spending.
Outlook
Flutter's next catalyst is its third-quarter report. It will show whether handle growth and hold are recovering, and whether the Brazil suspension forces further guidance changes. The Brazilian outcome depends on Congress within 120 days. For now, the upgrade shifts the debate from the September selloff to whether the quarter delivers the upside Citi expects.