CFRA reiterates Caesars' 'Sell' rating; more asset sales possible

Posted: 2 January 2025, 05:41 pm.

Last updated: January 2, 2025, 05:41 PM.

Caesars Entertainment (NASDAQ: CZR ) shares started 2025 on a tear, with above-average volume on the first trading day of the year after a research firm cut its price target to a “repeat” rating on the stock. There was a decline of 2.48%. ,

In a new note to clients, CFRA Research analyst Zachary Waring said the gaming stock is still a “sell,” while he lowered his price target to $27 from $35. This means a potential downside of 17.1% from today's closing price of $32.59. The analyst said Caesars' balance sheet remains “over-leveraged” and the operator will face tough comparisons as 2025 approaches.

We maintain our 2024 and 2025 earnings per share (EPS) estimates of -$0.05 and $0.75, respectively. CZR has benefited from significant revenue growth in recent years as the company has made large acquisitions, but it is now paying a price because the company financed those deals with debt,” the analyst said.

Caesars is the largest domestic gaming company by number of properties and recently added to that portfolio with the opening of Caesars Virginia in Danville, Virginia last month. That regional casino is a joint venture between the Nevada-based gaming giant and the Eastern Band of Cherokee Indians (EBCI).

CFRA says Caesars can sell more assets

Not surprisingly, CFRA's Waring said Caesars' debt load, which is the highest in the industry, is one of the reasons for his “sell” rating on the stock.

“Despite another great year for travel, CZR's trailing 12-month EBIT/interest expense ratio is 1.0x, which we believe means the company will need to sell assets to repay its debt. We don't see any compelling reason to buy the stock and like other names in the sector better, the analyst said.

The LINQ Promenade was sold for $275 million while the total sale price at the WSOP was $500 million. The NSUS Group had already paid Caesars half of it and the remainder was due over several years.

Another rumor from Caesar could aid debt-reduction effort

Due to the combination of its vast portfolio and large outstanding liabilities, Caesars is often at the center of gaming industry consolidation rumors. The company itself has said that it is ready to divest non-core assets.

An analyst recently said that Caesars could consider spinning off its digital operations, including Caesars Sportsbook, to unlock value for investors. Such a move would likely raise some capital that could be used to reduce debt, but the company has not said it is considering a spinoff.

Caesars reports fourth-quarter results after U.S. markets close on Tuesday, Feb. 25.