Stock market

51% reduction in one year! I think this oversold FTSE 100 stock is now poised for a comeback.

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I’m always looking for more sales. FTSE 100 Stock and I think I’ve found one that’s ready for restoration. With the share price down 51% in the last 12 months, it is in dire need of a revival.

Turning a company around doesn’t happen overnight, but there are several signs that this company is headed in the right direction. Naturally, it is risky to buy stocks that have been falling for months. But recent developments could put it back on track.

New strategy, new CEO, new license

After reaching above £22 in late 2021, the share price of Ladbrokes’ parent company entertainment (LSE: ENT) continues to decline. There were some signs of recovery in early 2023, but those dreams were soon dashed. At £7.38, it has lost two-thirds of its value in just two and a half years.

So what’s the deal?

Several factors can be blamed for the loss, but it is probably a combination of all of them. When inflation tightens the belt as it has recently, consumers prioritize survival over gaming and sports betting. Over the past year, former CEO Jett Nygaard Andersen has made several acquisitions in hopes of boosting revenue. Unfortunately, that bet didn’t pan out and the company posted a net loss of £936.5m in its full-year 2023 results.

So if inflation doesn’t come down soon, who knows when consumers will return to betting shops? As it currently stands, the Entain share price may continue to fall if the UK economic situation does not improve.

To cover some of the losses, the company is now looking to sell off a large chunk 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 looking for a new CEO. The previous Rank Group CEO Henry Birch, who also spent four years as chief executive of William Hill Online, has been touted as a possible replacement.

That’s not all.

The real cherry on the cake that could change Entain’s fortunes is the approval of a license by the Nevada Gaming Commission. The company is working hard to meet the stringent conditions that the commission requires before issuing a license. Over the past year, Entain has sacrificed $100m in revenue by closing more than 140 unregulated markets to meet strict compliance regulations. Now it’s ready to start marketing to a whole new demographic in the US.

Getting the license confirms the company’s commitment to improve its operations and serve its customers better. I think this is reflected in the recent forecasts which predict that revenue could double in the coming year. Using a discounted cash flow model, analysts estimate the share price is 43% below fair value, with a consensus 12-month price target above £10 – a 44% increase.

Now, I can go and put my hard-earned money into one of Entain’s betting machines and hope for a 50/50 chance of winning. But I like more odds on my side. With all the extra cash coming in from Nevada, I have high confidence in the returns from buying shares in the company.

And that’s exactly what I plan to do.


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