Investors Eye Three Key FTSE 100 Stocks Ahead of Budget

Ahead of the upcoming UK Budget on **November 26, 2023**, investors are closely monitoring several value stocks in the FTSE 100, particularly as market volatility has led to attractive pricing. Three companies stand out due to their potential for recovery and the impact of upcoming government announcements.

Lloyds Banking Group Faces Potential Windfall Tax

Lloyds Banking Group (LSE: LLOY) has shown significant growth, with its shares increasing by **60%** over the past year and an impressive **145%** over five years. The bank reported a full-year profit of **£4.5 billion** for 2024, which, while lower than the previous year’s **£5.5 billion** due to one-off costs, still indicates robust performance. A notable **£700 million** provision for motor finance mis-selling impacted the figures. In response to market conditions, management initiated a **£1.7 billion** share buyback, contributing to a total capital return of **£3.6 billion**, including dividends.

However, the upcoming Budget may bring challenges. Chancellor Rachel Reeves is considering a windfall tax that could increase the current surcharge on bank profits from **3%** to **8%**. This news has the potential to significantly affect Lloyds’ share price in either direction. With a price-to-earnings (P/E) ratio of approximately **13.9**, Lloyds remains an attractive option for long-term investors, although many may prefer to await the Budget’s details before making decisions.

EasyJet Struggles Amid Rising Costs

The budget airline EasyJet (LSE: EZJ) has faced difficulties in recovering from the pandemic, with its shares down **9.5%** over the past year and **25%** over the last five years. Despite a strong performance in its newly launched holidays division and resilient booking numbers, the European market remains challenging for consumers.

From April 2024, EasyJet will be affected by a **15%** increase in air passenger duty, a change that the airline industry hopes Reeves will reconsider. However, the likelihood of repeal seems low. Currently, EasyJet’s P/E ratio stands at **7.5**, indicating potential value, yet the airline has struggled to capitalize on this for several years. Investors contemplating a purchase may want to consider a long-term strategy to allow for recovery.

Entain’s Future Uncertain Amid Tax Concerns

In the gaming sector, Entain (LSE: ENT) presents a more speculative opportunity. With a P/E ratio of **23**, it may not fit the traditional mold of a value stock, but its shares have decreased by **3%** over the past year and **45%** over three years. The company has significant prospects in the U.S. market, supported by its joint venture, BetMGM, with MGM Resorts International.

The potential for increased taxation on gambling and gaming companies by Reeves could pose a risk to Entain’s stock value. Despite this, the company’s expansion in the U.S. may buffer against such impacts. Investors will be keen to see how the Budget affects Entain’s outlook.

In summary, while Lloyds Banking Group remains the standout option among the three, both EasyJet and Entain offer potential for long-term investors willing to navigate the associated risks. With a week full of anticipation leading to the Budget announcement, many FTSE 100 stocks warrant close attention as the market reacts to government fiscal policies.