I’m always on the lookout for oversold FTSE 100 stocks and I think I’ve found one that’s primed for a revival. With the share price down 51% in the past 12 months, it’s in dire need of a recovery.
Turning a company around doesn’t happen overnight but several signs suggest this one is heading in the right direction. Naturally, buying stocks that have been falling for months is risky. But recent developments could put this one back on track.
New strategy, new CEO, new licence
After peaking above £22 in late 2021, the share price of Ladbrokes’ parent company Entain (LSE: ENT) has been in steady decline. Early 2023 showed some signs of recovery but those dreams dissipated quickly. At £7.38, it’s lost two-thirds of its value in just two-and-a-half years.
So what’s the deal?
Several factors could be blamed for the loss but it’s probably a combination of them all. When inflation tightens belts as it has recently, consumers prioritise survival over gaming and sports betting. In the past year, former CEO Jette Nygaard-Andersen made several acquisitions in the hope of boosting revenue. Unfortunately, this bet didn’t pay off and the company posted a net loss of £936.5m in its full-year 2023 results.
So if inflation doesn’t decrease soon, who knows when consumers will return to the betting shops? As it stands currently, the Entain share price could keep falling if the UK’s economic situation doesn’t improve.
To salvage some losses, the company is now looking to sell a swathe of assets. Dutch company BetCity, Ladbrokes Australia, Enlabs and CrystalBet are four recent acquisitions that could be included in the sale. And with Nygaard-Andersen now out of the picture, Entain is seeking a new CEO. Former Rank Group CEO Henry Birch, who also spent four years as chief executive of William Hill Online, has been tipped as a possible replacement.
That’s not all
The real cherry on the cake that could turn Entain’s fortunes around is the grant of a licence from the Nevada Gaming Commission. The company’s been working hard to satisfy the rigorous conditions that the commission demands before issuing a licence. Over the past year, Entain has sacrificed $100m in revenue by ditching over 140 unregulated markets to meet strict compliance regulations. Now it’s ready to start marketing to an entirely new demographic in the US.
Being granted the licence affirms the company’s commitment to improving its operations and better serving its customers. I think this is reflected in recent forecasts that predict earnings could double in the coming year. Using a discounted cash flow model, analysts estimate the share price to be 43% below fair value, with consensus on a 12-month price target above £10 – a 44% increase.
Now, I could go and throw my hard-earned cash into one of Entain’s betting machines and hope for a 50/50 chance of a win. But I like the odds to be more on my side. With all that extra cash flowing in from Nevada, I’m far more confident in the returns I could get from buying shares in the company.
And that’s exactly what I plan to do.
The post Down 51% in a year! I reckon this oversold FTSE 100 stock is now ripe for a comeback appeared first on The Motley Fool UK.
Should you buy Entain now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
With £500k, here’s how I’d invest for passive income right now
3 reasons why the Legal & General share price may be a brilliant bargain!
FTSE 100 shares are STILL too cheap! Here’s one to consider buying today
My top growth stock for May is flying, but I think it’s just getting started!
Penny stocks to consider buying while their prices are this cheap
Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.