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On Wednesday, Raymond (NSE:RYMD) James analyst RJ Milligan adjusted the price target for Caesars Entertainment (NASDAQ:CZR) shares, reducing it to $49 from the previous $55. Despite the decrease, the firm maintains a Strong Buy rating on the stock. The revision reflects a blend of optimism and caution, acknowledging the potential for significant value creation in the longer term while also recognizing current economic challenges. Currently trading at $27.56, the stock sits within a broader analyst target range of $30-$62. According to InvestingPro analysis, Caesars appears undervalued based on its Fair Value metrics.
Milligan’s report underscores two immediate catalysts that could enhance Caesars’ stock value. The first is the company’s anticipated significant reduction in debt by 2025, using its free cash flow, which could justify a higher stock multiple. With current total debt standing at $25.8 billion and an EBITDA of $3.6 billion, this reduction would be significant for the company’s financial health. The second is the continued progress in digital operations, which is expected to make the target of $500 million in EBITDA more tangible.
The analyst also noted that while Caesars’ management has prioritized debt reduction, there is an expectation that the company will allocate some capital to repurchase shares, given the current stock valuation. The free cash flow yield, which is over 18%, and the digital business’s untapped value are seen as compelling reasons for the Strong Buy rating.
However, Milligan also pointed out the broader economic concerns, particularly regarding the U.S. consumer market, and the general disinterest among investors in companies with a hybrid model of land-based and digital operations. These factors could delay Caesars’ efforts to narrow the valuation gap.
In summary, Raymond James reaffirms its confidence in Caesars Entertainment’s long-term prospects but acknowledges the hurdles the company may face in the near term due to external economic factors and market sentiment.
In other recent news, Caesars Entertainment has launched a branded version of Pixiu Gaming’s Keno, named Caesars Palace Bonus Draw Keno, on its online platforms in New Jersey and Ontario. This move reflects the company’s commitment to expanding its digital offerings. Meanwhile, analysts have been weighing in on Caesars’ financial prospects. Stifel analysts maintained a Buy rating with a $51 target, citing growth potential despite challenges in the consumer environment. They noted the company’s increasing free cash flow and management’s belief in the stock’s undervaluation.
TD Cowen also maintained a Buy rating with a $48 target, highlighting the potential value creation from a prospective digital spin-off. The analyst mentioned that Caesars’ Regional operations exceeded expectations, while Las Vegas and Digital segments fell short. CFRA upgraded Caesars’ stock rating from Sell to Hold, raising the price target to $39 due to anticipated improvements in debt management. Finally, JMP analysts maintained a Market Outperform rating with a $53 target, despite mixed results, noting a favorable outlook for Las Vegas and regional markets in 2025. These developments underscore a varied but cautiously optimistic perspective on Caesars Entertainment’s future.
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