Episode Details

Flutter Entertainment plc (FLUT) Q2 2026 — Revenue $4,326M, up 3.3% and a small beat. But group adjusted EBITDA fell 45% to $508M, the US segment fell 70% to $119M, and GAAP was a $296M NET LOSS - $1.57 a share. The $0.49 the wires ran is adjusted, struck after $2.06/share of add-backs, and it still missed. Stock -9.8% to $94.71. Flutter, FanDuel's parent, reported adjusted EPS of $0.49 against a ~$0.54 consensus and the wires called it a small miss. It was not. Flutter LOST $1.57 a share under GAAP - a $296M net loss against a $37M profit - and the $0.49 only exists after $2.06 of add-backs. THE CALL: HOLD (3/5, CHEAP ENOUGH TO WATCH, TOO LEVERED TO BUY ON THE DAY OF A CUT) — base-case value ~$109.0 vs ~$94.71 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$109 vs the $94.71 price (+15%), and 32% BELOW the Street's $160.36 average. We build 2027 group adjusted EBITDA off Flutter's own guide: 2026 midpoint $2,655M, plus $135M as half the H2 US investment stops, plus $210M for US revenue +8% at a 35% incremental margin, plus $95M for International +4%, less $10M corporate creep = $3,085M. At 10x that is $30.9B of enterprise value, less $10.0B of net debt, over 173.5M shares, discounted a year = $109. Bear $53 (8x $2.60B), bull $167 (12x $3.45B). We add NOTHING for the new $500M cost programme - Flutter says it offsets inflation and tax. - WHAT THE $0.49 ACTUALLY IS. Not earnings. GAAP loss per share was $1.57. The release reconciles it: -$1.57, plus $0.06 transaction fees, $0.46 restructuring, $0.54 legal loss contingencies, $1.22 acquired-intangible amortisation, $0.39 share-based comp and $0.01 financing fees, less $0.23 of Fox Option gain and $0.39 of tax = exactly $0.49. That is $2.06 of net add-backs supporting a $0.49 figure - four times the number they produce. And Flutter earned $2.95 on this basis a year ago: the Street had already modelled an 82% collapse, and Flutter came in UNDER it. - THREE ARITHMETIC CHECKS OFF THE FILING. One: the segments tie - US $119M plus International $476M less $87M of corporate overhead = $508M group adjusted EBITDA exactly, and US $1,683M plus International $2,643M = $4,326M (+3.3% on $4,187M). Two: 173,539,102 ordinary shares on the 10-Q cover page (July 31, 2026) times $94.71 = $16.43B, matching the market cap on the tape - no float-only error. Three: net debt reconciles to $10,480M from $11,978M of total debt less $1,563M of cash, giving 4.3x leverage against 3.7x at December 2025. - THE GUIDANCE CUT IS 100% AMERICAN. Group revenue guidance fell from a $18.305B midpoint to $17.91B - a cut of $395M. US revenue guidance fell from $7.795B to $7.4B - a cut of $395M. The identical number. Group adjusted EBITDA guidance fell $210M to $2.655B; US adjusted EBITDA guidance fell $210M to $0.76B. International was untouched at $10.51B and $2.205B. And $270M of the cut is investment Flutter CHOSE to make behind FanDuel. US revenue fell 6% (sportsbook -15%) while US adjusted EBITDA fell 70%. - WHAT $94.71 REQUIRES, RUN BACKWARDS. The equity is $16.4B and the enterprise $26.9B because $10.5B of net debt sits in front of it. To earn 9.5% with 2.5% terminal growth that enterprise must throw off about $1.88B a year forever. Flutter's own 2026 guide gets to $1.20B - $2.655B of adjusted EBITDA less $640M of guided interest and $815M of guided capex - before cash tax and before $500M of restructuring. The price already assumes the restructuring ends AND the whole cost programme reaches the bottom line. Two honest methods, two answers: that gap is why this is a 3/5 HOLD. What to watch: Changes our mind UP: US adjusted EBITDA back above $250M in a quarter, or leverage under 4.0x by December. Confirms the bear: a fourth straight guidance cut in November, or leverage above 4.5x. We would buy $78-$85. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.