Caesars Earnings: Q1 Headwinds Have an Impact on Results, but Our Long-Term View Is Largely Intact

Coming into Caesars’ first-quarter results, we think concerns around the company’s 6 times debt/adjusted EBITDA in a landscape of high financing costs, as well as incremental digital competition, have hindered recent share performance. With the firm weighed down by some nonrecurring events (weather, weak hold, tough Las Vegas comparison, digital launch in North Carolina), it had a 3% first-quarter sales decline (down 1% adjusted for an asset disposition), along with EBITDAR margin deleverage of 274 basis points to 31.1%, behind our 2024 forecasts for 3% growth and deleverage of 42 basis points. We plan to reduce our 2024 sales forecast to around 2%-3% growth, with EBITDAR contracting roughly 60 basis points. As a result, we plan to lower our $73 fair value estimate by a mid-single-digit percentage, offering value for long-term-oriented investors, although we think shares are likely to remain volatile in the near term.