Stock market

1 FTSE 100 Stock I’m Staying Away From

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FTSE 100 Responsible entertainment (LSE: ENT ) is one of the stocks on the UK premier index that I would be happy to avoid for now.

Here’s why I’m explaining!

The gaming giant

Entain is an online gaming and sports betting firm. Although the company name may not be immediately recognizable, some of its brands are very well known. These include Party Poker, Ledbrooks, and Coral, to name a few.

Shares haven’t moved much over the past 12 months. At this time last year, they were trading for 1,297p compared to current levels of 824p.

Part of this is due to the macroeconomic volatility that has hurt many FTSE 100 stocks. This turmoil has been caused by high interest rates and inflationary pressures.

Why I’m Avoiding Entain Shares

In some cases, a drop in price may prompt me to buy the shares now cheap, for a recovery. Entain is definitely not one of those cases.

The broader perspective, as well as the specific issues with the business, are really difficult for me. Starting with broader issues, consumer spending has been weak across the board, including on items such as food, clothing and other items. Gaming and sports betting is definitely a luxury, and I can see performance potentially dropping if economic pressures continue.

Also, Entain’s board has confirmed in a recent update that stricter regulations in the gaming industry will hurt its performance levels. This increased regulation, and future changes, such as affordability testing, are red flags to me.

Additionally, the business has been hit with a hefty £585m fine from HMRC in relation to its legacy Turkish business.

However, it’s not all doom and gloom. I have to admit there are some green shoots of positivity. In a recent update, the business confirmed that gaming revenue was up more than 10%. In addition, the business has a strong profile, presence, and brand strength in a fast-growing market.

Additionally, BetMGM’s recent venture with MGM Resorts in the US could be profitable. Part of the plan is the fact that it has become the exclusive live odds sports betting partner for social media giant X (formerly Twitter). Entain can offer an entirely new revenue stream that can push investor sentiment, performance and returns upward.

Final thoughts

From a fundamental perspective, shares at a price-to-earnings ratio of 17 are not worth the money to me. Also, a dividend yield of just over 2% isn’t exactly noticeable. However, it is worth noting that profits are never guaranteed.

Gambling and online gaming is dangerous. To me, buying Entain shares also looks risky for my holdings.

I think there are better stocks out there for me that give me more stability, less risk, and better opportunities to help build my wealth.

I will definitely keep an eye on Entain shares and review my position in the future.


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