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January was another good month for UK shares, but not all of them. Two FTSE 100 stocks plunged 20%. In the short term even blue-chips can be volatile. But these two caught my eye because they were both shares I seriously considered buying last year, but (thankfully) didn’t. Should I snap them up today?
Entain shares plunge
The first is gambling and sports betting group Entain (LSE: ENT). I ran the rule over it last June, after the board upgraded its revenue forecast for BetMGM, its 50:50 joint venture with MGM Resorts.
Broker UBS was enthusiastic. It argued that while Entain was steadily improving operationally, the shares were still trading at a 20% discount to rivals. UBS upgraded the stock to Buy and lifted its target price to 920p. Oops. Today, Entain trades at 600p. Over one year its shares are down 13.7%, and 60% over three.
I’m not a huge fan of betting shares and it didn’t help that Entain had to stump up £585m following a bribery probe linked to its former Turkish business in 2023. Tighter gambling rules in the UK and Netherlands have weighed on profits, while fears of higher UK taxes came true in November’s Budget. Remote gaming duty was almost doubled, from 21% to 40%. Entain estimates this will cost it £200m a year.
The shares still have plenty of fans. Nineteen analysts offering one-year forecasts produce an average target price of 1,013p. That’s almost 70% above today’s level.
After a tough year, Entain may be due a recovery. However, I suspect many of those forecasts pre-date the latest share price slide. With a price-to-earnings ratio of around 20, the shares are also more expensive than I expected. Entain could bring real excitement this year, and high-risk investors might consider a punt. But it still isn’t for me.
Experian plunges too
January’s other big loser was Experian (LSE: EXPN). As a credit bureau it operates in a more respectable line of work, but this stock turns out to be a gamble too.
Here, investors are worried about artificial intelligence. Experian owns vast amounts of consumer and business data, but will customers still pay if AI tools can provide similar answers?
On balance, I think they might. I’ve learned not to rely on ChatGPT for financial data. Even basic facts like stock P/E ratios or dividend yields can vary wildly depending on the source. It’s nowhere near ready to replace Experian’s proprietary data.
The board insists AI will actually work in its favour, by allowing it to enhance its services. Yet even after a $1bn share buyback gave the stock a lift on 30 January, it’s down 30% in a year.
Again, analysts appear optimistic about the year ahead, setting a one-year target price of 4,201p. That’s a blistering 52% above today’s 2,761p. As with Entain, many of these forecasts may predate the recent drop.
Despite its troubles, Experian has a P/E of 24. I think that’s a bit expensive for what may ultimately prove a binary bet on AI. I’ll look elsewhere for my next recovery play. I can see plenty of exciting opportunities on the FTSE 100, and with fewer risks. I’ll research them instead.
