Caesars Stock Dealing with Bad Timing, but Offers Value

Posted on: March 10, 2025, 05:37h. 

Last updated on: March 11, 2025, 09:26h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • Caesars stock is off 25.11% over the past month
  • It’s a value idea, though it’s grappling with a tough environment

When it comes to recently battered gaming stocks, Caesars Entertainment (NASDAQ: CZR) is part of the rule, not the exception, as it’s shed more than a quarter of its value over the past month.

Harrah’s on the Las Vegas Strip. Shares of operator Caesars Entertainment offer value, but require patience, says an analyst. (Image: Reno Gazette-Journal)

While Caesars has no international operations, the stock is being hammered by President Trump’s tariff talk, which is pressuring consumer sentiment. Alone, that’s bad news for casino operators, who rely on discretionary spending. Throw in speculation that the president’s trade spat with Canada is prompting some Canadians to halt plans to visit Las Vegas and there’s a perfect storm working against shares of Caesars. At least one analyst believes the stock currently offers some value.

While levered equities are always the first to take it on the chin in a broader risk off environment, we believe, to some degree, the sell-off in CZR leaves the name as the most compelling relative value in the group at present,” writes Deutsche Bank analyst Carlo Santarelli in a report out on Monday.

“Levered” refers to Caesars’ well-documented debt burden — one that makes the stock vulnerable to deep pullbacks during broader market selloffs and one the operator is working diligently to pare. The operator expects to generate $1 billion in free cash flow this year and nearly all of that tally could go to reducing leverage.

Caesars Stock Requires Patience

With consumer sentiment dour and the US equity selloff seemingly unrelenting, embracing consumer cyclical stocks, including gaming equities, is difficult.

Specific to Caesars, the stock could come under additional pressure if professional investors dump the shares. Santarelli cautioned Caesars is unlikely to notch a V-shape, and that the stock lacks near-term catalysts, confirming patience is required.

“Our message here is primarily tailored for longer-term oriented investors, as we don’t see near-term catalysts, which are important to reshaping sentiment, emerging in the near term,” writes the analyst. “That being said, we believe current levels, for longer-term oriented investors, offer considerable upside potential, despite a near-term cadence that is likely to remain choppy.”

The near-term catalyst picture could change if the gaming company opts to sell noncore assets, which would serve the objective of reducing debt. Management said it’s open to such transactions, but there’s no concrete timeline as to when one will materialize.

Caesars Digital Suppressing Valuation

Caesars Digital is making strides, but it doesn’t command a premium valuation on par with rivals. Thus, when that business is stripped out, the company’s core land-based operations are inexpensive, according to Santarelli.

At current levels, and using year-end 2025 rent and net debt assumptions, we calculate the enterprise value of CZR at $26.8 billion, observes the analyst. “With larger digital peers trading at 15-25x 2025 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts, we believe a case can be made that CZR garners a multiple on its Digital business, which is, at best, akin to its broader brick-and-mortar trading multiple.”

There’s been ample chatter regarding Caesars potentially selling its internet segment to unlock value for shareholders, but no announcement has been made to that effect.