Caesars Entertainment, as per J.P Morgan's forecast, may fail to meet its projected earnings for the second quarter.
In a recent analysis, J.P. Morgan has increased its price target for Caesars Entertainment, predicting a potential value of $48 per share for the gaming giant. This optimistic outlook is based on Caesars' impressive financial performance and promising growth prospects, particularly in its digital operations.
While the search results do not provide a specific price target for Caesars Entertainment in 2027, they suggest that the company is currently valued attractively, with some assessments indicating a fair value in the mid-$40s. This valuation is influenced by factors such as Caesars' material net free cash flow generation, which is expected to continue through 2027, and its heavily discounted current valuation.
Daniel Politzer, the analyst behind the report, believes that Caesars will strike a balance between debt paydown and share repurchase, a decision that has left shareholders divided on the best use of cash. Despite this divide, Politzer sees the company's cash flow generation as an advantage that should benefit shareholders through debt reduction and capital returns.
One of the key factors influencing predictions about Caesars' performance is the growth of its digital operations. Caesars' digital business has shown significant growth, helping offset challenges in other areas, such as its Las Vegas operations. However, Politzer notes that Caesars' digital business does not seem to be receiving much or any credit for its success.
Another factor to consider is potential weakness on the Las Vegas Strip, which could impact Caesars' earnings due to its significant presence there. For the third quarter, Politzer expects Las Vegas EBITDAR of $430 million, down from $459 million, while regional EBITDAR remains unchanged at $498 million.
Investor focus points include the health of the regional customer, recently improving gaming-revenue trends, the regional promotional environment, and avenues to maintain margins. The decrease in regional EBITDAR primarily reflects one-off headwinds, including flooding and closure of Metropolis in Bossier City, Louisiana, low table hold in Atlantic City, and construction disruption in Lake Tahoe.
J.P. Morgan's second-quarter digital EBITDAR forecast is $57 million, slightly above the Street's $55 million. For Caesars' regional casinos, Morgan now forecasts $448 million of EBITDAR, down 3% versus their prior $463 million. Politzer forecasts $479 million of EBITDAR for Caesars' Las Vegas properties, 1% lower than the Street's $482 million.
Looking ahead, Politzer's focus for Las Vegas is on the forward outlook, particularly the third quarter and fourth quarter of 2022, as well as the first half of 2026, due to potential group/convention business growth. J.P. Morgan also expects Caesars to generate 50% or more of its market cap in net cash flow by the end of 2027.
In conclusion, J.P. Morgan's increased price target for Caesars Entertainment reflects a positive outlook for the company's future performance, driven by its strong digital operations, material net free cash flow generation, and promising growth prospects. However, potential challenges such as weakness on the Las Vegas Strip and one-off issues affecting regional casinos will need to be navigated carefully to ensure continued success.
The strong performance and growth prospects of Caesars Entertainment in its digital operations are expected to continue, potentially contributing to the company's valuation being in the mid-$40s in 2027, according to some assessments. J.P. Morgan's forecast for Caesars' Las Vegas properties in 2022 suggests a potential EBITDAR of $479 million, but potential challenges on the Las Vegas Strip might need careful navigation to ensure continued success. The gaming culture in Las Vegas, along with casino-games and casino-and-gambling operations, forms a crucial part of Caesars' business, contributing significantly to its overall value.
