Down 28% in a year, could this FTSE 100 stock stage a turnaround?

Sumayya Mansoor explains how this FTSE 100 stock could turn around its recent poor share price performance amid market volatility.

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FTSE 100 incumbent Entain (LSE: ENT) has seen its shares struggle in recent months. It’s not alone as many stocks have fallen due to macroeconomic and geopolitical issues. Could things turn around? Let’s take a closer look at what’s been happening and what could occur in the future.

Betting and gaming

Entain is an online sports betting and gaming business. The company name may not resonate with the wider public but I’m sure some of its best-known brands might. These include Coral, Ladbrokes, bwin, and partypoker to mention a few.

It’s easy to see why so many FTSE 100 stocks have experienced mixed fortunes of late. Soaring inflation, rising interest rates, as well as geopolitical tensions have caused a cocktail of volatile issues to hamper global markets.

Entain shares are currently trading for 941p. At this time last year, they were trading for 1,313p, which is a 28% drop over a 12-month period.

The bull and bear case

Starting with the bear case, there are several factors that could hamper Entain shares. For example, in the UK, there are rumours that affordability checks could occur before consumers are allowed to gamble. This is bad news for the business and sector as it could cause demand and performance to dwindle.

Another factor that could hurt Entain is the current economic outlook. With essential bills such as energy, food, and mortgage rates climbing, consumers may have less cash to spend on pastimes such as online gaming.

Moving to the bull case, there’s lots to like about Entain, in my opinion. Entain shares would provide a passive income opportunity with a dividend yield of 1.9%. This is lower than the FTSE 100 average of 3.9%, but if the business grows, I’d expect the payout to grow too. However, I’m conscious that dividends are never guaranteed.

Next, Entain has an excellent market position and profile. Popular brands, including some mentioned earlier, as well as a stake in US-based BetMGM could help boost performance, investor sentiment, and returns.

Entain’s stake in BetMGM could be crucial for its growth. This is because many states across the pond are legalising gambling and it could be a high-growth market with plenty of opportunities to boost its performance and profile.

Next, analysts at top brokers Shore Capital and Peel Hunt recently gave Entain shares a buy rating. They note, as do I, that short-term challenges could hinder the shares but the longer-term outlook is positive.

A FTSE 100 stock that could soar once more

I’m not too concerned by Entain’s recent drop in share price, or the fact that the business is anticipating tough times in the shorter term. As I’m a long-term investor, I can see Entain shares recovering when the market recovers.

If anything, Entain shares falling provide a buying opportunity at cheaper levels before any share price recovery occurs. It’s worth noting that the shares soared to over 2,100p, more than 120% higher than current levels, during the post-pandemic period. I’m not saying they’ll reach the same heights once more, only time will tell. I do think they’re capable of recovering from the recent drop off and climbing higher.

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.

Sumayya Mansoor 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.

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