Caesars Entertainment (CZR) is a U.S.-based hotel and casino entertainment company. CZR has one of the biggest and most diversified portfolios of destinations in the United States, including some excellent resorts offering unique amenities and at the same time sharing a common goal of providing exceptional service and elating experiences to the customers.
Two successful gaming leaders, Caesars Entertainment and Eldorado Resorts, came together in 2020 to form this present Caesars Entertainment.
Caesars Entertainment has faced a lot of complexities in its 2015 post-bankruptcy life, but the company has more or less carved a path for itself in the past seven years. Caesars even sailed through the pandemic as people who were bereft of entertainment options turned to its casinos for solace.
However, the stock stopped being the market’s darling at the end of last year. It has lost ~12% of its value in the past year and about 14% year-to-date.
Yet, considering the series of developments it has been making these days and the extensive prospects the online betting industry holds for the future, the market is hugely optimistic about the future performance of the Caesars Entertainment stock. Many analysts consider it a strong Buy. We are bullish on it as well.
Caesars Entertainment is a good quality sports-betting stock. The company has been working really hard to turn things around by implementing a series of interesting strategies.
Recently, it launched its Sportsbook, a mobile application for sports wagering purposes, in the state of Illinois for downloading and registration. The company feels this wagering application would help it to extend its consumer reach across more states, thereby increasing its revenues and boosting its overall growth.
So, if things go as planned, the company might emerge as an undisputed leader in this space by capitalizing on the growing demand for sports betting.
Daniel Politzer, a Wall Street Analyst from Wells Fargo, feels quite the same about Caesars Entertainment and has therefore rated the stock as a buy a few days back. However, he has also given an Overweight rating to its shares and has lowered the price target from $127 to $105 because of the lower-than-expected Q4 EBITDAR result that had occurred due to some regional shortfalls.
Besides, he has also said that though the Las Vegas Strip demand has already started to recover and regional trends have improved from January into February, some EBITDA drags are still expected this year.
Increasing Demand for Online Sports Betting
The U.S. sports betting industry has witnessed immense growth since the pandemic, as remote lifestyles drove more people to engage in it. This growth has been a result of the legalization of sports betting across 30 states in the United States since the removal of the Federal ban on sports wagering in 2018.
According to the American Gaming Association, last year in the United States, the commercial gaming industry has generated a milestone of $53 billion in revenue. This figure should increase in the coming years.
Some concerns like the Fed’s hawkish monetary stance and the Russia-Ukraine conflict might pose some short-term difficulties to the growth of this industry, but with all the ongoing technological evolution and favorable government policies, the condition of the sports betting industry is expected to improve further in the coming times.
Being one of the popular participants in this industry, Caesars Entertainment can take significant advantage of this.
Improved Financials
The financials of Caesars Entertainment have been improving gradually, and the amount of losses is also coming down with time. In the fourth quarter of 2021, however, it could not meet market expectations. That said, the company generated a revenue of $2.6 billion compared to the $1.6 billion generated a year ago, and its losses also came down to $434 million this quarter from $555 million in the same period last year.
Moreover, the same-store adjusted EBITDA also improved by $233 million year-over-year, and the same-store adjusted EBITDA excluding its Digital segment improved by a massive $573 million. The increased synergy target from its July 2020 merger with Eldorado Resorts has been one of the driving forces behind this improvement.
Interesting Growth Strategies
Caesars Entertainment has been developing a series of exciting strategies that have made the market pretty interested in it. As discussed earlier, it recently launched Sportsbook, its sports wagering mobile application in Illinois, to grab more investors, making the application live in 22 states and jurisdictions in the United States.
Recently, Sportsbook has entered into a contract with NYRABets LLC to launch a new horse racing account wagering app called Caesars Racebook which will be available for download this spring.
This will let both companies provide horse racing content from more than 250 tracks worldwide. Further, to also grab the attention of poker lovers, it will conduct the World Series of Poker and has released the schedule for it.
Wall Street’s Take
Turning to Wall Street, 12 out of 12 analysts have given Caesars Entertainment a Buy Rating, making it a Strong Buy. The highest price target for the stock is $183, which is a potential upside of a little over 127.6%.
The average Caesars Entertainment price target is $119.50, which implies a healthy 48.6% upside potential on the stock.
Conclusion
The global sports-betting industry is growing, and Caesars Entertainment is an integral part of this industry, too. The stock is still relatively cheap now, as it is much closer to its 52-week low than its high. So, investors who want to venture into this risky yet lucrative sports-betting market can consider the Caesars Entertainment stock at this point.
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