Caesars Deleveraging Story Poised for Dramatic Acceleration, Says Analyst

Caesars Entertainment’s (NASDAQ:CZR) debt burden stood at $13.5 billion at the end of March — among the highest in the gaming industry — but one analyst sees the company’s debt-reduction efforts potential accelerating over the near-term. In a recent note to clients, Stifel analyst Steven Wieczynski  says “the potential expected sale of a Las Vegas […]

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Caesars Leisure’s (NASDAQ:CZR) debt burden stood at $13.5 billion on the finish of March — among the many highest within the gaming trade — however one analyst sees the corporate’s debt-reduction efforts potential accelerating over the near-term.

Caesars Palace on the Las Vegas Strip. An analyst sees a number of causes to love the inventory. (Picture: CNN)
In a current notice to purchasers, Stifel analyst Steven Wieczynski  says “the potential anticipated sale of a Las Vegas Strip asset ought to dramatically speed up an already appreciable natural deleveraging story.”
Courting again to final 12 months, Caesars administration stated it anticipated to unveil the sale of one in all its Strip venues early in 2022. Since then, the one debates centered round when the operator would formally announce an asset sale and which Las Vegas venue it could be.

Almost midway via the 12 months, that announcement hasn’t arrived. Final month, studies surfaced the operator is buying the Flamingo at a price ticket of roughly $1 billion. There’s hypothesis that Caesars could have issue unloading that property as a result of it wants enhancements and enterprise there may decline if it’s now not a part of the Caesars Rewards program.

Conversely, owing to comparisons on different current Strip property gross sales, it’s doable Caesars might command excessive teenagers a number of when it decides to half methods with one in all its Sin Metropolis venues.
Caesars Administration Sounds Optimistic Tone
Wieczynski lately met with Caesars CEO Tom Reeg and different high-ranking executives, noting they’re bullish on each Strip and regional casinos and that buyers could also be overlooking the corporate’s free money movement (FCF)-generating potential.
We imagine the market continues to low cost the ‘post-COVID’ FCF potential of CZR’s brick & mortar enterprise, administration’s iGaming/OSB alternative (not even priced into shares anymore), the Omni-channel advertising and marketing potential embedded in Complete Rewards, and potential for asset gross sales,” says the analyst.
Nonetheless, as is the case with different gaming equities, Caesars is slumping this 12 months. The shares are off 51.35% year-to-date as a result of culprits comparable to inflation and margin issues. On the brilliant aspect, it’s doable that margin issues are exaggerated and Caesars could have some momentum on that entrance.
“Administration firmly sees these issues as overblown, highlighting that (1) the present pattern within the financial savings price might indicate tailwinds to the patron via 2023 and (2) their general value construction is predominately ‘right-sized’ by this level with any modest pockets of value inflation possible offset by the return of the excessive margin group buyer,” provides Wieczynski.
Caesars Danger/Reward too Engaging to Ignore
With Caesars inventory off 62% from its 52-week excessive and points comparable to inflation, hovering gasoline costs and rising rates of interest factored into the share worth, threat/reward could also be skewing extra in the direction of “reward.”
“We imagine shares have corrected to the purpose the place buyers must revisit this story. Vegas and Regional traits proceed to outpace expectations, and it looks like traits have solely gotten higher via Could,” concludes Wieczynski.
He charges Caesars a “purchase” with a $113 worth goal, implying it might probably greater than double from the June 10 shut of $45.50.
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