This FTSE 100 growth stock is up 22% already in 2021! Here’s why I’m keen to buy

Entain (formerly GVC) has enjoyed a strong start to the year thanks to takeover chatter. Jonathan Smith takes a closer look at the FTSE 100 growth stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

2021 is here and already the FTSE 100 is making gains. The index added around 200 points on Monday morning, with some individual stocks pulling the index higher. In particular, the Entain (LSE:ENT) share price jumped over 20% higher, and has so far managed to hold on to those gains. The name Entain may not sound familiar. In fact, the name change only happened a month ago, with the former name being GVC Holdings. Regardless of the company moniker, the FTSE 100 growth stock has started 2021 with a definite bang.

What’s the story?

Entain owns well-known gambling brands such as Ladbrokes, Coral and PartyPoker. As such, anyone buying shares in the business is buying into all of these smaller brands. US-based MGM Resorts‘ recent takeover offer for Entain was all about its target’s strength in the UK sports-betting industry. The takeover proposal was valued at £8.1bn, or £13.83 per share. The move higher for the stock in the New Year was because this offer was actually turned down!

Entain said the offer undervalued the business. Given the share price spike, the speculation is that £13.83 really was too cheap and the business is worth more. From here, another higher offer could be made. If it is, then investors who bought in could receive a windfall if the new price is higher than the current share price (around £14). This windfall would be via the conversion rate into MGM shares. Existing shareholders would receive MGM shares as part of the payout, although a cash alternative is expected to be available. I think MGM may come back with a higher bid, as a UK betting operator has large value for the firm.

A growth stock with potential

MGM and perhaps others US gambling firms would want to buy Entain for several reasons. Firstly, the business is performing well. The FTSE 100 stock has seen its share price almost triple over the past five years. In a recent trading update, the CEO commented that the business has “delivered our nineteenth consecutive quarter of double-digit online growth, along with market share gains in all our major territories”. That’s a very impressive statistic to be able to come out with, and clearly shows Entain is in a profitable, sustainable market.

Another reason companies in the US could be interested is due to the legalisation of sports betting. Instead of setting up a completely new entity, simply buying into an established sports-betting firm can bring rich rewards and plenty of synergies. An example of this was seen last year when a US business bought out William Hill.

If Entain is taken over, investors will be faced with a couple of options. If I bought now and an offer was accepted, I could take the MGM shares and sell them straight away. This would allow me to realise a cash profit from the premium in the conversion of Entain shares to MGM shares. Or I could take the cash offer, making it simpler from an admin point of view. 

Either way, I think the growth stock offers me good potential profit, especially in comparison to other FTSE 100 companies.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »