Posted on: January 2, 2025, 05:41h.
Last updated on: January 2, 2025, 05:41h.
Shares of Caesars Entertainment (NASDAQ: CZR) started 2025 on a downbeat note, shedding 2.48% on above-average volume on the first trading day of the year after a research firm “reiterated” a sell rating on the stock while cutting its price target.
In a new note to clients, CFRA Research analyst Zachary Warring said the gaming stock is still a “sell” while slashing his price target to $27 from $35. That implies potential downside of 17.1% from today’s closing price of $32.59. The analyst said Caesars’ balance sheet remains “over-levered” and that the operator faces tough comparisons as 2025 unfolds.
We maintain our 2024 and 2025 earnings per share (EPS) estimates of -$0.05 and $0.75, respectively. CZR has benefited in recent years from significant revenue growth as the company made large acquisitions, but is paying the price now as the company financed those deals with debt,” noted the analyst.
Caesars is the largest domestic gaming company as measured by number of properties and recently added to that portfolio with the opening of Caesars Virginia in Danville, Va. last month. That regional casino is a joint venture between the Nevada-based gaming giant and the Eastern Band of Cherokee Indians (EBCI).
Caesars Could Sell More Assets, Says CFRA
Not surprisingly, CFRA’s Warring said Caesars’ debt burden, which is among the highest in the industry, is one of the reasons for his “sell” rating on the stock.
“CZR’s trailing-12-month EBIT/interest expense ratio is 1.0x even after another great year for travel, which we believe means the company will have to sell off assets to pay down its debt. We see no compelling reason to buy shares and like other names in the space better,” said the analyst.
He didn’t mention specific assets the operator could sell in 2025. Last year, Caesars hauled in $525 million that went toward reducing debt via the sales of the World Series of Poker (WSOP) to investment firm NSUS Group Inc. and the LINQ Promenade to a joint partnership comprised of TPG Real Estate and Acadia Realty Trust.
The LINQ Promenade was sold for $275 million while the total sale price on WSOP was $500 million. NSUS Group already paid Caesars half that figure with the remainder due in several years.
Another Caesars Rumor Could Aide Debt-Reduction Effort
Due to the combination of its expansive portfolio and its large outstanding liabilities, Caesars is often at the epicenter of gaming industry consolidation rumors. The company itself has said it’s open to divesting non-core assets.
An analyst recently said Caesars could consider spinning off its digital operations, which include Caesars Sportsbook, to unlock value for investors. Such a move would likely raise some capital that could be used for reducing debt, but the company hasn’t said it’s mulling a spinoff.
Caesars delivers fourth-quarter results after the close of US markets on Tuesday, Feb. 25.
