Analysts Trim Caesars Price Targets but Maintain ‘Buy’ Ratings as Digital Arm Soars
Wall Street analysts are trimming their price targets for Caesars Entertainment after its latest quarterly report showed weakness in its Las Vegas and regional casino segments. However, the powerful performance of the company’s digital arm has been enough to keep most of them bullish, with ‘buy’ ratings largely remaining intact.
A Tale of Two Businesses
The mixed analyst reactions reflect a clear split in Caesars’ performance. The company’s digital division, which includes Caesars Sportsbook and its online casino, was the undeniable bright spot of the quarter.
It posted a strong $80 million in EBITDA, showcasing significant growth and a clear path to sustained profitability.
On the other hand, the company’s traditional brick-and-mortar business did not meet expectations. Both the Las Vegas and regional casino segments underperformed, with overall company profit (EBITAR) coming in 1% below market forecasts. This weakness in the core casino business prompted several analysts to adjust their short-term outlooks.
The View from Wall Street
The analyst adjustments were largely modest, with most firms maintaining a positive long-term view.
- Citizens JMP lowered its price target from $45 to $43 but kept its “Outperform” rating, citing the digital segment’s strength.
- Deutsche Bank and Truist each trimmed their targets by $1, to $50 and $37 respectively, but both pointed to a “strong path to deleveraging” as the digital business grows.
- Macquarie made the largest cut, lowering its target by $5 to $40, but maintained its “Outperform” rating, calling the stock “too cheap” given its digital growth.
In a contrarian move, Stifel analyst Steven Wieczynski actually raised his price target to $45. He increased his future EBITDA estimates by about 4%, calling the stock’s current risk/reward ratio “too compelling to pass up.”
Despite the target trims, the underlying message from Wall Street is clear: the long-term story for Caesars is positive. The common thread in nearly every analyst note is the powerful growth of the digital business and its impact on the company’s overall financial health.
Analysts see a clear path for Caesars to pay down its significant debt as free cash flow increases, driven by the now-profitable digital arm. Truist analyst Barry Jonas also noted that the company still owns more than half of its real estate, a valuable asset that could be used to raise cash through a sale-leaseback transaction with a real estate investment trust (REIT).
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