Caesars Could Consider Share Buybacks, Not Looking at Near-Term M&A

Posted on: March 15, 2024, 03:05h. 

Last updated on: March 18, 2024, 11:47h.

Caesars Entertainment (NASDAQ: CZR) could consider share repurchases if its stock price remains stagnant. The casino giant is also mulling mergers and acquisitions opportunities that would require the issuance of new shares.

Caesars CEO Tom Reeg in a 2021 CNBC interview. He expects improvements for the second Las Vegas F1 race and is bullish on the operator’s online unit. (Image: CNBC)

Caesars CEO Tom Reeg commented on those matters Thursday at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum. In a conversation with J.P. Morgan analyst Joseph Greff, Reeg said that while there’s “no shortage of opportunities in the market” in terms of acquisitions, Caesars won’t be running to issue stock to make deals.

That’s likely a relief to shareholders at a time when Caesars stock is down 16.2% year-to-date.   The issuance of new shares, regardless of the reason, would dilute current investors.

Reeg also told Greff that free cash flow generated from traditional revenue sources, as well as the addition of a new casino in Danville, Virginia, and the transition of Harrah’s New Orleans to Caesars Palace branding, would be used to reduce debt. The gaming company has been actively paring outstanding liabilities, which stood at $12.4 billion at the end of last year.

Second Las Vegas Grand Prix

Reeg also discussed the Las Vegas Grand Prix with Greff. The Formula One (F1) event took place last November in Sin City, but didn’t move the needle for Caesars because the series catered to high-end customers.

That resulted in benefits for upper-tier Strip venues, including Aria, Bellagio, Caesars Palace, Cosmopolitan, and Wynn. But there wasn’t much positive impact for other Caesars properties, such as Flamingo, Harrah’s and the Horseshoe.

While F1’s return to Las Vegas didn’t generate the cash flow Caesars was hoping for, Reeg expects “better profitability” from the second Las Vegas Grand Prix, citing “a primary beneficiary of the market-wide effort to better tailor the event to mass-market participants.”

Reeg told Greff that the gaming company did accrue benefits from the Super Bowl last month. But he noted it’s “seeing more idiosyncratic obstacles related to events that are affecting March, along with lower-than-normal table hold in January and February.”

Caesars Online Outlook Bright

Reeg also told Greff that the operator’s 2023 rebranding of its online casino to the Caesars Palace name is paying dividends. The change occurred last August, and in every month since the switch, gross gaming revenue (GGR) has topped internal estimates. Reeg added that 50% year-over-year growth is the expectation, with February revenue standing at $40 million.

He didn’t comment on other states joining the iGaming party. But if that were to happen, just one new state could help Caesars generate cash flow on par with what’s seen in two or three others when it comes to online sports betting.

Reeg also told Greff the gaming company expects to roll out a second online brand later this year “to increase customer acquisition and customer engagement on the CZR online ecosystem.”