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On Wednesday, CFRA analyst Zachary Warring downgraded Caesars Entertainment (NASDAQ:CZR) stock from Buy to Hold, setting a new price target of $30.00, down from the previous $39.00. Currently trading at $26.96, InvestingPro analysis suggests the stock is slightly undervalued, with analyst targets ranging from $23 to $62. The revised price target is based on 8.3 times the firm’s 2025 adjusted EBITDA estimate, which is slightly lower than Caesars’ three-year average forward EV/EBITDA multiple of 8.8x. Warring explained the decision, noting a reduction in the 2025 earnings per share (EPS) estimate by $0.50 to $0.25, while maintaining the 2026 EPS estimate at $1.00.
Caesars Entertainment reported first-quarter earnings that fell short of Wall Street expectations, with a normalized EPS of -$0.48 compared to -$0.44 year over year, and $0.30 below the consensus estimates. The company’s revenue, however, was slightly above estimates at $2.79 billion versus the expected $2.74 billion. InvestingPro data shows the company maintains a healthy gross profit margin of 51.7%, despite not being profitable over the last twelve months.
Breaking down Caesars’ performance by segment for the first quarter, Las Vegas revenues saw a 1.9% year-over-year decline, while the Regional segment experienced a 1.7% increase. The Digital segment showed significant growth with an 18.8% rise. Adjusted EBITDA followed a similar pattern, with Las Vegas slightly down by 0.7%, Regional up by 1.6%, and Digital showing a substantial increase of $38 million to $43 million.
The management team at Caesars expressed confidence in the U.S. consumer market, indicating no signs of a slowdown and strong forward bookings. Despite this, the company’s balance sheet has been a point of concern, with operating income reported at $488 million against an interest expense of $574 million for the quarter. InvestingPro analysis reveals a concerning debt-to-equity ratio of 6.19, with short-term obligations exceeding liquid assets. For deeper insights into Caesars’ financial health and 10+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.
Warring’s neutral stance on Caesars Entertainment is influenced by the broader challenging macroeconomic environment and the company’s balance sheet issues, which are seen as potential obstacles to the stock’s performance.
In other recent news, Caesars Entertainment reported mixed financial results for the first quarter of 2025. The company missed both earnings per share (EPS) and revenue forecasts, posting an EPS of -$0.54 against the expected -$0.17 and revenue of $2.79 billion, slightly below the anticipated $2.82 billion. Despite these shortfalls, the digital segment showed a 19% year-over-year revenue increase, and the outlook for Las Vegas operations remains strong. Citizens JMP maintained its Market Outperform rating and a $45 price target for Caesars, citing the company’s better-than-expected first-quarter performance and favorable valuation compared to historical averages.
Stifel analysts adjusted their price target for Caesars from $51 to $42, retaining a Buy rating. They expressed concerns about consumer spending and the company’s debt levels but noted potential long-term value and free cash flow expansion. Stifel also highlighted the company’s focus on reducing leverage and the possible monetization of its digital platform. Caesars’ digital segment continues to grow, with net revenue up 19% year-over-year, and the company anticipates a record year for group business in 2025. Overall, analysts from both Citizens JMP and Stifel remain optimistic about Caesars’ future prospects despite current challenges.
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