On Wednesday, Stifel, a financial services firm, increased its price target for shares of Caesars (NASDAQ:CZR) Entertainment (NASDAQ:CZR) to $58.00, up from the previous target of $56.00. The firm has reaffirmed its Buy rating on the stock. The adjustment follows a recent investor meeting with Caesars' top management, including the CEO, COO, CFO, and SVP-Finance, held at the Global Gaming Expo (G2E) in Las Vegas.
During the meeting, the management of Caesars Entertainment conveyed a positive outlook. Stifel's updated view suggests that the market may be underestimating the long-term free cash flow (FCF) potential of Caesars' physical casino operations, as well as the company's capability to reduce its debt load.
The report highlighted that, according to observations from various gaming operators, the trends in both Las Vegas and regional markets are robust. The customer base appears to be stable, with only isolated instances of weakening due to heightened competition or adverse weather conditions.
Stifel has made a slight reduction to its near-term estimates for Caesars to account for the negative impacts of weather and ongoing construction disruptions at certain properties. Despite these adjustments, the new price target implies approximately a 35% potential upside from current levels.
The firm remains optimistic about the future, expecting Caesars Entertainment to potentially reach around $5 billion in EBITDA. This optimism is bolstered by growing confidence in the company's strategy for digital and online sports betting (OSB) profitability.
In other recent news, Caesars Entertainment has been making strategic financial moves to enhance its financial position. The company has partially redeemed $1.065 billion of its 8.125% Senior Notes due 2027, contingent upon the proceeds from the issuance of its 6.000% Senior Notes due 2032. This redemption could potentially reduce Caesars' interest expenses. The company also increased its offering of Senior Notes due 2032 from $1 billion to $1.1 billion, aiming to manage existing debt more efficiently.
In addition, Caesars has initiated a $500 million share repurchase program, which TD Cowen views as a strong signal of the company's confidence in its future financial performance. The company reported steady second-quarter 2024 consolidated net revenues of $2.8 billion, with a record $1.1 billion from Las Vegas operations.
Caesars has also expanded its digital footprint with the launch of the Horseshoe Online Casino in Michigan, planning to roll out in other jurisdictions where Caesars' digital gaming is operational.
Lastly, the company sold the World Series of Poker brand's intellectual property rights to NSUS Group Inc. for $500 million, while retaining the right to host the main live tournament series on the Las Vegas Strip for the next 20 years. These are recent developments that reflect the company's ongoing efforts to strengthen its financial position and enhance its services.
InvestingPro Insights
Adding to Stifel's optimistic outlook on Caesars Entertainment (NASDAQ:CZR), recent data from InvestingPro provides additional context for investors. Despite the company's current challenges, including a negative EPS of -$1.29 over the last twelve months, there are signs of potential improvement.
InvestingPro Tips highlight that analysts predict the company will be profitable this year, aligning with Stifel's positive stance on Caesars' future performance. This projection is particularly noteworthy given that Caesars has not been profitable over the past twelve months.
The company's market capitalization stands at $9.35 billion, with a price-to-book ratio of 2.17. Caesars has demonstrated strong returns over both the last month and the last three months, with price total returns of 20.11% and 17.47% respectively. These short-term gains support Stifel's view of the company's potential upside.
It is worth noting that Caesars' revenue for the last twelve months was $11.39 billion, with a robust gross profit margin of 52.5%. The company's EBITDA for the same period was $3.71 billion, although it experienced a slight EBITDA growth decline of 1.62%.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 8 more InvestingPro Tips available for Caesars Entertainment, providing a deeper understanding of the company's financial health and market position.
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