• Sat. Jun 3rd, 2023

Caesars Wins Upgrade, But Analyst Isn’t Too Enthusiastic

Posting date: May 25, 2023 at 05:23h.

Last updated: May 25, 2023 at 05:23h.

Caesars Entertainment (NASDAQ: CZR) earned a tepid upgrade today as a sell-side analyst sees a more balanced risk/reward profile emerging with shares of the casino operator.

Caesars upgrade
Visitors entering Caesars Palace Las Vegas. The analyst is not too bullish, but upgraded the stock. (Image: David Paul Morris/Bloomberg)

In a note to clients Thursday, Susquehanna analyst Joseph Stauff upgraded the gaming equity to “neutral” from “negative” while boosting his price target to $39 from $27. While that’s a significant increase, the analyst’s new price objective on Caesars implies modest downside from the stock’s close today at $41.40.

Stauff’s price target on Caesars is also well below the Wall Street consensus of $71.31. At $39, Stauff’s price forecast for the gaming stock is lower than his peers. Stauff is not a heavy bear on Caesars

While his upgrade of Caesars may not be overtly positive, Stauff isn’t a heavy bear either. The shares are off 17.25% during that time, dragging Caesars to a year-to-date loss of 0.48%.

Stauff Not Heavily Bearish on Caesars

While his upgrade on Caesars isn’t overtly positive, Stauff isn’t heavily bearish on the stock, either.We are upgrading our rating on CZR

to Neutral (from Negative) following our assessment of a more balanced risk/reward at current levels (LV vs. regional/digital),” wrote the analyst.Behind rival MGM Resorts International (NYSE: MGM), Caesars is the second-largest operator on the Las Vegas Strip. Stauff points out that about half of the stock’s value is derived from its Sin City portfolio. Citing the second- and third-quarter “seasonal air pocket,” the analyst observed Caesars could be heading for some tough comparisons due to lethargy in the Las Vegas events calendar

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However, things will perk up later this year with significant assistance from the as Vegas Grand Prix in November. Some analysts already forecast that event could be a $25 million boon to Caesars’ Las Vegas properties and that figure doesn’t include benefits to the operator’s Strip casinos accrued over race weekend.

Capital Markets Event(s) Possible?

Susquehanna’s Stauff added that it’s possible Caesars “is likely to find favorable capital market events,” which he views as critical to the shares owing to the operator’s high leverage. At the end of the first quarter, the company had $13.2 billion in outstanding liabilities compared to $965 million in cash, excluding restricted cash of $258 million.

Stauff didn’t identify specific capital markets events Caesars could consider. The company’s executives have said that asset sales in 2023 are unlikely. They also refinanced the debut maturities and extended them to reduce interest costs.

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