UPDATE: As the UK prepares for the Budget announcement on November 26, 2023, investors are closely monitoring key FTSE 100 stocks that may experience significant volatility. Recent fluctuations in the market have left several companies undervalued, presenting potential opportunities for long-term investors.
Among the stocks attracting attention is Lloyds Banking Group (LSE: LLOY). The bank has seen its shares surge by 60% over the past year, despite a forecasted decline in full-year profits to £4.5 billion from £5.5 billion in 2023, primarily due to a £700 million mis-selling provision. A major factor to watch is whether Chancellor Rachel Reeves will implement a windfall tax on banks, potentially raising the surcharge on profits from 3% to 8%.
“The shares could move quickly in either direction depending on what she decides,” an analyst noted. With a price-to-earnings ratio of approximately 13.9, Lloyds remains a viable option for investors, although many may choose to adopt a wait-and-see approach until the Budget details are revealed.
Meanwhile, EasyJet (LSE: EZJ) continues to grapple with challenges stemming from the pandemic. Its shares have dropped 9.5% over the last year and 25% over five years. While the airline’s bookings remain stable, an impending 15% increase in air passenger duty starting April 2024 could further strain its recovery. Investors are urging Reeves to reverse this increase, but uncertainty remains regarding her plans.
Currently, EasyJet’s P/E ratio stands at 7.5, suggesting potential value for long-term investors. However, the question remains: will this be the year it finally takes off?
Lastly, Entain (LSE: ENT), the gaming and gambling giant, presents a unique case with a P/E ratio of 23. Although its shares have fallen 3% in the past year and 45% over three years, the company is well-positioned for growth, particularly in the booming US market through its joint venture, BetMGM. Nevertheless, a potential tax hike on ‘sin stocks’ could impact its stock price during the Budget announcement.
“We’ll see what Reeves has in store for us on Wednesday,” commented a market expert. As investors await the Chancellor’s decisions, these three FTSE 100 stocks are poised for rapid movement based on the Budget’s implications.
As the November 26 Budget approaches, it promises to be a pivotal moment for these companies and the broader market. Investors are advised to stay vigilant and prepared for potential shifts in stock valuations based on government policy changes.
With more FTSE 100 bargains emerging, this week is shaping up to be a critical period for the UK stock market. Investors should keep their eyes peeled for developments that could lead to substantial market reactions.
