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On Thursday, TD Cowen analysts adjusted their outlook on Caesars Entertainment (NASDAQ:CZR), reducing the stock’s price target to $40 from the previous $48. The stock, currently trading at $25.56, has seen a significant decline of about 46% over the past six months. Despite the downward revision, the firm maintained a Buy rating on the casino and resort operator’s shares. According to InvestingPro data, the company’s shares appear undervalued based on their Fair Value analysis.
The decision to lower the price target was influenced by several factors impacting the company’s financial projections. Analysts cited a combination of softer visitation, weaker average daily rates (ADRs), challenging year-over-year comparisons, and overall macroeconomic uncertainty as key reasons for the adjustment. InvestingPro data reveals the company operates with a significant debt burden, with total debt of $25.8 billion and short-term obligations exceeding liquid assets, as indicated by a current ratio of 0.77.
In a statement, the analysts from TD Cowen emphasized the current market dynamics affecting Caesars Entertainment. "Macro-Driven Pullback Weighs On Estimates; We are lowering our est. to reflect softer visitation, weaker ADRs, tough comps, and macro uncertainty," they noted. The analysts also advised investors to exercise patience, suggesting that near-term headwinds could affect market sentiment, though they believe long-term value remains intact for the company. While not profitable over the last twelve months, InvestingPro analysts project the company will return to profitability this year, with an EPS forecast of $1.25 for FY2025.
Furthermore, the analysts mentioned the growing investor interest in strategic alternatives for Caesars Entertainment’s Digital division. They pointed out that the possibility of a full or partial separation of this segment could potentially unlock additional value for shareholders.
The new price target of $40 set by TD Cowen was derived through a sum-of-the-parts (SOTP) valuation method. This approach takes into account the value of each individual segment of the company’s business to arrive at an overall valuation, reflecting the analysts’ continued confidence in the underlying worth of Caesars Entertainment despite the near-term challenges identified.
In other recent news, Caesars Entertainment has been the focus of several analyst reports and strategic developments. CFRA upgraded Caesars Entertainment’s stock rating from Buy to Strong Buy, citing potential value in the company’s shares despite concerns over a weaker U.S. consumer and an extended balance sheet. Raymond (NSE:RYMD) James also maintained a Strong Buy rating but adjusted its price target from $55 to $49, highlighting the company’s efforts to reduce debt and enhance digital operations. Stifel analysts retained their Buy rating with a $51 price target, expressing confidence in growth potential despite leverage concerns and challenging comparisons from previous successes.
TD Cowen maintained its Buy rating with a $48 price target, emphasizing potential value creation through a prospective digital spin-off. The firm noted that Caesars’ Regional operations exceeded forecasts, though its fourth-quarter earnings fell short in Las Vegas and its Digital segment. In addition to analyst activity, Caesars Entertainment launched the first branded version of Pixiu Gaming’s Keno, expanding its online casino offerings in New Jersey and Ontario. This new game, Caesars Palace Bonus Draw Keno, reflects the company’s commitment to enhancing its digital presence.
The launch is part of Caesars’ broader strategy to integrate its iconic brand into digital gaming platforms, offering players a unique experience. Analysts and investors are closely monitoring these developments, particularly the potential strategic moves in Caesars’ Digital segment. Caesars’ management is exploring options like a spin-off or IPO for its Digital arm, which could unlock significant shareholder value.
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