This FTSE 100 stock was the big winner from the UK Budget

yesterday

Photo credit: Getty Images

When you invest, there is a chance that you could lose some or all of your money. The worth of your investments can fluctuate, meaning it can increase or decrease, and you might end up with less than what you originally invested.

This article is meant to provide information and should not be taken as personal financial advice. When investing in currencies other than British pounds, there is a risk associated with currency exchange. Since exchange rates fluctuate continuously, this can impact the investment's value when converted to pounds. Even if a stock's price goes up in its original currency, you might still incur losses in pounds. Additionally, shares traded on foreign exchanges may incur extra charges related to trading and currency conversion, and they might have different tax implications. Moreover, these investments might not offer the same level of regulatory protection as you would find in the UK.

You're currently viewing a complimentary article that features perspectives that could vary from those of The Motley Fool's Premium Investing Services. Consider joining The Motley Fool today to gain immediate access to our best analyst suggestions, comprehensive research, investment tools, and additional benefits. Find Out More.

After the UK Budget was revealed on Wednesday, October 30, one company on the FTSE 100 stood out from the rest. The company that experienced this surge was Entain (LSE:ENT).

The company's stock has dropped 27% since the beginning of the year. However, when the chancellor announced tax hikes, the stock surged by nearly 9%.

Rachel Reeves entered the initial Budget of the new administration with the goal of raising £40 billion in taxes. She made a commitment not to burden working individuals, placing a significant focus on businesses instead.

Prior to the announcement, several research organizations proposed increasing taxes on gambling activities. The Social Market Foundation advocated for raising the tax rate on online casinos from 21% to 42%.

Entain is among the biggest betting firms globally and would have been a prime target for scrutiny. However, the expected announcement never materialized – tax rates on gambling will remain unchanged.

Once it became clear, the stock price surged from £7.25 to £7.70 per share. By the end of the day, the shares were up 9% compared to where they began.

Implications For Entain Explained

Entain's website highlights to investors how impactful the recent updates are. It points out that taxes represent the company's largest individual cost, and that in 2023, it contributed £529 million in taxes in the UK.

To provide some background, this amount is roughly double the free cash flow the company produced last year and nearly five times the dividends it paid out. Such a potential increase would have been significant.

Even though an additional £529 million wouldn’t significantly impact the £40 billion the chancellor was trying to raise, it likely crossed their minds. As a result, Entain shareholders may feel quite satisfied.

It's clear why investors have reacted favorably to the recent updates. However, considering that the stock price remains significantly lower than it was in January, could this be a chance to buy?

"Is Buying The Right Choice For Me?"

Entain is well-placed in the online gaming sector, and the lasting appeal of this industry was evident in the company's trading update for the third quarter released earlier this month.

Even so, I’m not keen on this stock. Although the company has managed to dodge a tax hike in the UK, there are numerous other external challenges to consider.

There's an expectation of a shifting regulatory landscape in Brazil starting in 2025, which may present some difficulties. The same situation applies to upcoming deposit regulations in the Netherlands.

I believe that this type of situation will consistently pose a challenge for the company, and there’s little it can do to change that. For this reason, I haven't included it in my stock purchase list.

Steering clear of a tax hike that was said to have widespread backing from the public is a significant achievement for Entain. It's also not surprising that their stock price is rising as a consequence.

The stock appears to be undervalued, trading at roughly five times its EBITDA. However, given the unique characteristics of the business, I would prefer to put my money into different opportunities.

Further Insights On Investing Articles

BP Isn’t Alone: Other FTSE 100 Dividends Dive

October 31, 2024 | Paul Summers

Supporters of BP are facing ongoing challenges in 2024. However, there's another high-quality dividend stock that is experiencing similar struggles. What could this mean?

Is October's Biggest Loser A Buy For November?

October 31, 2024 | Harvey Jones

Harvey Jones is on the hunt for the top stock to invest in this November, and he's particularly interested in this FTSE 100 company...

"Two Overlooked FTSE 100 Stocks: Bargain At 41% And 55% Off?"

October 31, 2024 | Harvey Jones

Harvey Jones has been keeping an eye on these FTSE 100 stocks for several years and is quite puzzled by their lackluster results. Could it be…

Is This Overlooked UK Stock A Buy For November?

October 31, 2024 | Harvey Jones

Harvey Jones has discovered the appeal of this UK stock. The established company in the FTSE 100 experienced a significant decline in its share price...

Is The Stock Market On The Brink Of Collapse?

October 31, 2024 | Stephen Wright

As the specter of inflation looms large this Halloween, could the stock market be bracing for a scary downturn?

Turn £10,000 Savings Into £2,710 Monthly Income

October 31, 2024 | Paul Summers

With £10,000 set aside in savings and a monthly investment of £200, Paul Summers shares his strategy for creating a…

A FTSE 100 Stock With Growth, Dividends, And Value!

October 31, 2024 | Royston Wild

Are you in search of the best all-around stocks in the FTSE 100? Royston Wild shares his insights on one of the top shares in the index...

Top AIM Stocks To Buy This November

October 31, 2024 | The Motley Fool Team

We reached out to our writers to gather their top picks for AIM-listed stocks to invest in this November, including a special recommendation for Hidden Winners!

We have made diligent efforts to ensure that any information shared by The Motley Fool Ltd is accurate at the time it is published. The views expressed are solely those of the authors. The content does not take into account the unique circumstances of any specific person or group and should not be considered as personal advice or recommendations. You should not rely on this content for personal advice when making your decisions. If you need personalized advice or recommendations, we encourage you to consult with a qualified independent financial adviser. The author, The Motley Fool Ltd, and Richdale Brokers and Financial Services Ltd accept no responsibility for any loss or harm experienced by individuals as a result of decisions made based on the content provided by The Motley Fool Ltd, which is classified as an unregulated activity.

The prices of stocks and shares, along with any dividend income, can go up or down, and there are no guarantees, so it's possible you’ll receive less than what you put in. You should only invest money that you can afford to lose and not depend on dividend income to pay your bills. Stocks traded on foreign exchanges might incur extra trading and currency exchange fees, along with administrative expenses, withholding taxes, and varying accounting standards. They might also have different tax consequences and may lack the same level of regulatory protections. Currency exchange costs could negatively impact the value of shares when converted to sterling, meaning you could incur losses in sterling even if the stock price rises in its original currency. Any performance metrics that don't account for currency fluctuations may provide a misleading picture of actual returns for investors using sterling.

Fool and The Motley Fool are both names operated by The Motley Fool Ltd. This company is officially recognized as a representative of Richdale Brokers & Financial Services Ltd, which is authorized and regulated by the Financial Conduct Authority (FCA) under registration number 422737. We provide insights, opinions, and analysis on various consumer credit offerings, including loans, mortgages, insurance, savings, and investment products and services, including those from our partner affiliates.

The Motley Fool Ltd. has its registered office located at 5 New Street Square, London EC4A 3TW. The company is officially registered in England and Wales under number 3736872 and has a VAT number of 188035783.