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Caesars Entertainment Inc CZR

Morningstar Rating
$39.16 +0.36 (0.93%)
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Company Report

Caesars: Report of Icahn Investment Boosts Shares, but We See Little Reason for Activism

No-moat Caesars Entertainment's shares moved 11% higher during May 31 trading on a Bloomberg report that activist investor Carl Icahn has built a sizable position in the company, according to people familiar with the matter. Icahn had previously invested in Caesars during 2019 and helped push the successful merger with Eldorado. Now, Caesars management is made up of the former Eldorado team, which has a very successful record of integrating large acquisitions, deriving synergies, and working down debt levels. The executive team has succeeded in integrating Eldorado with Caesars and has extracted more than $1 billion in cost synergies, which was above its initial $400 million target. Further, it has lowered Caesars’ debt/adjusted EBITDA to 6.4 times in 2023 from 8.8 times in 2021, and we forecast the ratio to fall to around 5 times by 2026. Reducing debt ratios remains the top capital allocation priority, in our view, and we maintain our Exemplary Capital Allocation Rating. Thus, if the report of an Icahn investment is accurate, we see little merit for it to be led by activist reasons, but rather an investment in an undervalued name. Caesars still trades at a 50% discount to our unchanged $69 fair value estimate, even after the strong move higher.

Price vs Fair Value

CZR is trading at a 292% premium.
Price
$39.16
Fair Value
$57.00
Uncertainty
High
1-Star Price
$524.84
5-Star Price
$13.40
Economic Moat
Tnkt
Capital Allocation
Lrtgljpl

Bulls Say, Bears Say

Bulls

Caesars' best-of-breed management has generated cost and revenue synergies from its merger with Eldorado.

Bears

Debt levels are elevated after the merger with Eldorado, which could elevate financing costs for future renovations and investment.

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News

Trading Information

Previous Close Price
$38.80
Day Range
$38.4639.34
52-Week Range
$31.7460.27
Bid/Ask
$39.19 / $39.35
Market Cap
$8.46 Bil
Volume/Avg
4.7 Mil / 4.3 Mil

Key Statistics

Price/Earnings (Normalized)
147.71
Price/Sales
0.74
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
0.78%

Company Profile

Caesars Entertainment includes about 50 domestic gaming properties across Las Vegas (49% of 2023 EBITDAR before corporate expenses) and regional (48%) markets. Additionally, the company hosts managed properties and digital assets, the later of which produced marginal EBITDA in 2023. Caesars' US presence roughly doubled with the 2020 acquisition by Eldorado, which built its first casino in Reno, Nevada, in 1973 and expanded its presence through prior acquisitions to over 20 properties before merging with legacy Caesars. Caesars' brands include Caesars, Harrah’s, Tropicana, Bally’s, Isle, and Flamingo. Also, the company owns the US portion of William Hill (it sold the international operation in 2022), a digital sports betting platform.
Sector
Consumer Cyclical
Industry
Resorts & Casinos
Stock Style Box
Small Value
Total Number of Employees
51,000

Competitors

Valuation

Metric
CZR
WYNN
MGM
Price/Earnings (Normalized)
147.7116.6513.86
Price/Book Value
1.923.83
Price/Sales
0.741.450.87
Price/Cash Flow
4.946.915.43
Price/Earnings
CZR
WYNN
MGM

Financial Strength

Metric
CZR
WYNN
MGM
Quick Ratio
0.501.351.23
Current Ratio
0.691.431.51
Interest Coverage
0.991.413.66
Quick Ratio
CZR
WYNN
MGM

Profitability

Metric
CZR
WYNN
MGM
Return on Assets (Normalized)
3.03%8.85%3.03%
Return on Equity (Normalized)
23.22%31.53%
Return on Invested Capital (Normalized)
14.64%13.75%4.74%
Return on Assets
CZR
WYNN
MGM
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Resorts & Casinos Industry Comparables

1-Day Chart
Name
Price
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
Las Vegas Sands Corp
LVS
YlxgqqgcMlfhvtx$34.2 Bil
Galaxy Entertainment Group Ltd ADR
GXYYY
Tgcdmh$21.4 Bil
Galaxy Entertainment Group Ltd
GXYEF
Wvzhg$21.4 Bil
Sands China Ltd Shs Unitary 144A/Reg S
SCHYF
Rqpcrz$18.1 Bil
Sands China Ltd ADR
SCHYY
Btlwxhk$18.1 Bil
MGM Resorts International
MGM
FdgwkkyhpDpdcf$13.2 Bil
Wynn Resorts Ltd
WYNN
BwrnslgfByvydq$10.1 Bil
Melco Resorts and Entertainment Ltd ADR
MLCO
KtsyjlwxBmfdgd$3.5 Bil
PENN Entertainment Inc
PENN
XgnknphrSmzq$3.0 Bil

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