Published on: January 2, 2025, 05:41h.
Last updated on: January 2, 2025, 05:41h.
Shares of Caesars Entertainment (NASDAQ: CZR) started 2025 in a downbeat trend, dropping 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 and reduced its price target.
In a recent client note, CFRA Research analyst Zachary Warring maintained the stock as a sell and lowered the price target to $27 from $35, indicating a potential downside of 17.1% from the closing price of $32.59. The analyst cited an over-leveraged balance sheet and tough comparisons ahead for Caesars in 2025.
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 holds the top spot among domestic gaming companies by property count and recently added Caesars Virginia in Danville, Va. to its portfolio in partnership with the Eastern Band of Cherokee Indians (EBCI).
Caesars Could Sell More Assets, Says CFRA
CFRA’s Warring mentioned that Caesars’ high debt load, one of the sector’s highest, is a key factor in the sell rating.
“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.
No specific assets for potential sale in 2025 were mentioned. In the prior year, Caesars generated $525 million from the sales of the World Series of Poker (WSOP) to NSUS Group Inc. and the LINQ Promenade to TPG Real Estate and Acadia Realty Trust.
The LINQ Promenade was sold for $275 million and the WSOP sale totaled $500 million. NSUS Group has already paid half of the amount with the remainder due in the coming years.
Another Caesars Rumor Could Aid Debt-Reduction Effort
Given its extensive portfolio and outstanding liabilities, Caesars is frequently at the center of gaming industry consolidation speculation. The company has expressed willingness to divest non-core assets.
An analyst suggested that Caesars may contemplate spinning off its digital operations, which include Caesars Sportsbook, to unlock value for investors. This move could generate capital for debt reduction, although the company has not confirmed any such plans.
Caesars will report fourth-quarter results after the US markets close on Tuesday, Feb. 25.