Caesars an Undervalued Stock to Buy in Q4, Says Morningstar

• Caesars stock has been drubbed this year and its Q4 start is ugly
• Morningstar says the shares are undervalued and worth owning in the fourth quarter

Amid slumping Las Vegas Strip visitation, shares of Caesars Entertainment (NASDAQ: CZR) are off 26.24% year-to-date. So bad are things for the gaming stock that if the tide of selling pressure isn’t soon stemmed, it could fall to its April “Liberation Day” lows.

Even with those ominous factors in mind, some analysts and research firms remain constructive on the Harrah’s operator. Morningstar named Caesars one of 33 “undervalued” stocks for investors to consider owning in the fourth quarter. It can be argued that perspective should come with a warning label because Caesars’ start to the final three months of 2025 has been ugly as highlighted by an 8.79% drop over the past week.

Consumer cyclical stocks have underperformed the market in 2025. The sector entered the fourth quarter trading 8% above our fair value estimate. About 40% of the stocks that we cover in the sector are trading in the 4- and 5-star range, says Morningstar sector director Erin Lash,” according to Morningstar.

Caesars was one of three consumer discretionary stocks to appear on the research firm’s fourth-quarter undervalued list and the only one hailing from the gaming industry.

Caesars Stock Hit on Multiple Fronts

As has been widely documented, Las Vegas gross gaming revenue (GGR) and visitation tumbled this year – bad news for Caesars, which is the second-largest Strip operator. That’s not the end of the gaming stock’s woes.

More recently, the company’s online sports betting exposure has come to negative light due to the emergence of prediction markets. While Caesars has a buffer by way of land-based casinos — something pure-play sportsbook operators lack — the stock has been a baby thrown out with the bathwater amid reports of soaring football volume on Kalshi.

Those headlines are pertinent to Caesars and its shareholders because the company’s digital unit, which includes internet sports wagering, has been making progress. It’s also viewed as a plum asset with spin-off potential — something that could go a long way toward reducing the operator’s debt. With sports wagering equities under duress, Caesars may be forced to keep its interactive business in-house for the time being.

Caesars Stock an ‘Attractive’ Opportunity

Even with the aforementioned hurdles, some experts believe there’s a value case for Caesars. Morningstar’s Lash calls the stock “an attractive investment opportunity,” noting it trades at substantial discount to the research firm’s $61 fair value estimate. That’s about 2.5x the stock’s closing price today.

Debt reduction is central to the long-term Caesars case as Lash forecasts a significant decline in the operator’s debt/earnings before interest, taxes, depreciation, and amortization (EBITDA) levels in years ahead.

“Management has a record of generating cash flows from strategic tie-ups to pay down debt rather than boosting shareholder returns via dividends or share repurchases,” concludes the analyst. “And we think it will continue to employ the same tactics; we forecast debt/adjusted EBITDA will fall to around 4 times (from our forecast of 6.4 times in 2025) over the next few years.”