Caesars stock gets mixed reviews from analysts
Caesars Entertainment Inc. (NASDAQ: CZR ) shares have underperformed the market in 2023 and have struggled heading into 2024, down 3.58% year to date. While the name isn't controversial, analysts covering the casino stake are divided.
Recent sell-side commentary on the Horseshoe operator confirms the mixed sentiment on the stock. Caesars, for example, was one of four gaming stocks that Morgan Stanley lowered its price target on Tuesday. The research firm lowered its price forecast for the Flamingo operator to $45 from $48, just below Wednesday's closing price of $45.36.
By contrast, Morgan Stanley has a more constructive view on MGM Resorts International (NYSE: MGM ), Caesars' biggest rival on the Las Vegas Strip. The bank expects the stock to rise this year, which may be the preferred avenue to invest in Sin City rather than Caesars.
Of the 16 analysts covering Caesars, 12 rate it a Strong Buy or Buy, while 4 rate it a Hold. The $61.94 consensus price target implies a potential upside of 36.55% from current levels. But this also means there is room for downward correction.
F1 has limited benefits for Caesars stock
Last November's Las Vegas Grand Prix was a boon for Las Vegas Strip casino resorts, including Caesars Palace.
However, J.P. Morgan analyst Joseph Grave noted in a recent note to clients that much of the event's proceeds go to pricier Las Vegas Strip hotels such as MGM and Wynn Resorts ( NASDAQ: WYNN) operating hotel. On the other hand, medium-sized venues, including most of the hotels on Caesars Boulevard, do not gain significantly from Formula 1 racing.
Greif lowered his price forecast for Caesars stock to $54 from $55, citing other off-market factors. Construction on Harrah's New Orleans, which is being converted into Caesars Palace, caused some disruption in the second half of last year, the analyst said.
This is a temporary issue and will be resolved soon. Maybe investors are worried about Caesar's lackluster presence in Atlantic City, New Jersey. A bigger worry. On the Boardwalk, Caesars' three venues failed to pose a serious threat to the area's top trio -- MGM's Borgata, Hard Rock Atlantic City and Ocean Casino Resort.
Some bullish comments
The sell-side as a whole is not bearish or neutral on Caesars stock. JMP Securities analyst Jordan Bender is also among the stock's optimists. In a recent report, Bender highlighted Caesars' strong management team who have a knack for lowering costs and generating long-term free cash flow.
Even more impressively, control of excess costs has made Old Eldorado/Caesar one of the most successful profit expansion stories of this era, highlighting significant returns on its invested capital/synergistic performance," Bender pointed out.
He set a $65 price target on Caesars and believes the operator can generate $1.6 billion in free cash flow, or $7.50 a share, sometime next year.
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Source: www.casino.org
