Caesars stock could lose lagging status
Caesars Entertainment Inc. (NASDAQ: CZR ) shares have fallen 5.4% year to date. That's a far cry from gains in the S&P 500, the VanEck Gaming ETF (NYSEARCA: BJK ) and the broader consumer discretionary sector.
On the other hand, Harrah's operators gained 7.5% last week, signaling its potential to emerge from the crisis.CNBC recently looked for S&P 500 stocks that are flat or down 10% since the start of 2024 that have received a consensus buy rating from analysts and are at least 20% above the consensus analyst price target. Caesar meets all three criteria.
In fact, of the 10 stocks on the list, the casino operator has the best upside potential, rising 37% compared to Wall Street's consensus price forecast. In fact, sellers are constructive on the stock, with 12 out of 16 analysts rating it a Strong Buy or Buy. The other four called it "keep." The $59.81 average price target implies an upside potential of 36.2% from current levels.
Some analysts believe the stock has been "too harshly punished," especially as Nevada's gross gaming revenue (GGR) continues to set or break records. Additionally, Caesars insiders have made some small purchases in the stock recently, which could be a positive sign.
Caesars Stock Still a Hedge Fund Favorite
In addition to being a popular idea among sell-side analysts, Caesars stock remains popular in the hedge fund community -- a status typically assigned to stocks.
Data recently released to clients by Bank of America showed that Caesars had a relative net hedge fund weight of 11.88 in the S&P 500, a figure that trailed only 10 other stocks. This makes the Flamingo operator one of the 20 most used stocks by hedge funds. It's also the only game title in the group.
Hedge fund relative weight is defined as market participants' reported long positions minus estimated short positions.
The gaming company has done an excellent job of deleveraging and could benefit if the Fed cuts interest rates further this year. This may be one of the factors driving some hedge funds to take long positions in Caesars.
Speaking of interest rate cuts...
Also appearing on the CNBC list above is VICI Properties (NYSE: VICI ), the largest casino owner in the U.S. and owner of Caesars Palace properties. In addition to the iconic venue, Caesars is one of the largest real estate investment trust (REIT) tenants.
REITs are one of the most interest rate-sensitive asset classes, and with Fed rates at their highest levels in 20 years, it's easy to see why VICI stock has been depressed for the long term.
Still, the stock remains popular among analysts: 20 out of 23 rate it a Strong Buy or Buy. VICI's consensus price forecast of $35.91 implies a 20.7% upside from current levels and a dividend yield of 5.6%, more than 125 basis points above what investors would earn by purchasing the 10-year Treasury note.
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Source: www.casino.org
