UPDATE: Investors brace for a potentially volatile week as November 26, 2023 marks the UK Budget announcement, with significant implications for key FTSE 100 stocks. Following a turbulent week in the markets, three companies stand out as potential value opportunities: Lloyds Banking Group, EasyJet, and Entain.
The Budget, set to be unveiled by Rachel Reeves, could bring surprise changes that may impact these stocks dramatically. Investors are particularly concerned about the potential for increased taxes, especially on financial institutions and ‘sin stocks’.
Lloyds Banking Group has enjoyed a remarkable 60% surge over the past year, with shares rising 145% over five years. However, the bank recently reported full-year 2024 profits of £4.5 billion, down from £5.5 billion in 2023 due to one-off costs, including a £700 million provision for motor finance mis-selling. The market is now watching closely to see if Reeves will introduce a windfall tax that could hike the surcharge on profits from 3% to 8%. This uncertainty is likely to cause swift movement in Lloyds’ stock price.
Meanwhile, EasyJet continues to struggle, with its shares down 9.5% in the past year and 25% over five years. Although bookings remain stable, an upcoming 15% increase in air passenger duty from April 2024 could further pressure the budget airline. Investors are looking for Reeves to potentially repeal this increase, but uncertainty remains as to her intentions.
With a price-to-earnings (P/E) ratio of 7.5, EasyJet may appear undervalued, but its long-term recovery remains uncertain. Investors eyeing this stock should consider a long-term hold strategy to allow time for recovery.
Lastly, Entain, the gaming giant, has a P/E ratio of 23 and has seen shares decline 3% over the past year and 45% over three years. The company faces potential tax hikes on gambling operations, which could impact its profitability; however, its strong presence in the US market through its joint venture with MGM Resorts International could mitigate potential losses.
As the Budget approaches, market participants are advised to keep a close watch on these stocks. The developments could lead to rapid price fluctuations depending on Reeves’ announcements. With only three days until the Budget is revealed, investors must act quickly to position themselves for what could be a transformative moment in the market.
For those considering investments, these FTSE 100 stocks could prove to be rewarding in the long run if managed wisely. As this story develops, stay tuned for updates on the implications of the Budget announcement on these key players in the UK market.
