U.S. stocks edge higher; solid earnings season continues
Investing.com - JMP Securities maintained its Market Outperform rating and $45.00 price target on Caesars Entertainment (NASDAQ:CZR) stock, representing a 51% upside from the current price of $29.71, citing potential benefits from new tax legislation for tipped employees. The company, with a market cap of $6.2 billion and annual revenue of $11.3 billion, has shown strong momentum with a 4.65% gain in the past week.
The legislation allows tipped employees to deduct up to the first $25,000 of voluntary tips from their taxes. While employees must still pay taxes on tips as they are earned, they can claim deductions when filing tax returns.
JMP analysts believe this change could lead to larger tax refunds during tax season, potentially boosting revenue for Caesars Entertainment during the first and second quarters of the year.
During a recent Las Vegas visit, JMP noted that gaming operators were uncertain about the financial impact of the tax change on their businesses, but the firm views it as a positive catalyst for companies like Caesars.
The tax benefit for tipped employees is set to expire in 2028, creating a temporary advantage for hospitality and gaming companies that employ large numbers of tipped workers.
In other recent news, Caesars Entertainment has attracted attention from several investment firms due to its financial prospects and strategic initiatives. Goldman Sachs initiated coverage with a Buy rating, citing a promising setup in Las Vegas and stabilizing regional markets, which are expected to drive significant free cash flow over the next three years. JPMorgan also started coverage with an overweight rating, highlighting Caesars’ potential to generate substantial free cash flow through 2027, which could benefit shareholders through debt reduction or capital returns. TD Cowen maintained a Buy rating, emphasizing the company’s robust cash flow and digital growth potential. Analysts at TD Cowen also noted the importance of Caesars’ omni-channel gaming platform and its potential for balance sheet improvement through digital asset monetization. Meanwhile, JMP Securities reiterated a Market Outperform rating, noting the company’s strategic initiatives to capitalize on non-gaming revenue streams and a robust convention market. They also highlighted Caesars’ advantageous position on the Las Vegas center strip and its premium segment’s strong activity. Caesars’ regional operations, particularly in New Orleans, continue to perform well, despite some challenges like flooding at Harrah’s Metropolis. Analysts remain optimistic about Caesars’ ability to adapt to industry trends and leverage opportunities for growth.
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