Caesars Stock Contends with Downgrade Despite Earnings Beat

Caesars Entertainment (NASDAQ:CZR) delivered estimate-beating third-quarter results on Tues and piece analysts are mostly offbeat around the report, there’s at least one dissenting voice.

In a billet to clients today, CFRA Research Arun Sundaram downgraded Caesars stock to “hold” from “buy” patch paring his 12-month terms target area on the shares to $35 from $40. That implies significant downside from today’s closure hold around $44.

We at present consider limited upside to shares as the economical backcloth weakens and we wait locomote exact to return inward 2023, leading to operating profit depress than their interest group payments,” wrote the analyst.

Recent GDP information paint a picture the US economic system is already get together the traditional definition of a recession — two sequentially quarters of negative growth. The third-quarter written report showed paltry growing and while the gaming manufacture currently isn’t yet reflecting a recession, some Wall Street banks and economists are forecasting the reaching of economic muscular contraction inwards 2023.

CFRA Concerned About Recession

Broadly speaking, Caesars’ third-quarter results were whole and the cassino goliath said its Oct performance was the topper in society history, indicating the electric current billet is off to an impressive start. However, CFRA’s Sundaram highlights some potentially concerning data points.

“CZR’s Las Vegas segment same-store sales grew 5.9% year-over-year in Q3 while its Regional section was monotonic with adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) down 4% inwards Las Vegas and upwards 3% for its Regional segment,” noted the analyst

Caesars is the second-largest operator on the Las Vegas Strip, significance at that place is an element of economic sensitiveness with the stock. However, Caesars direction remains bullish on the Strip and its regional properties, locution they control no signs of softening demand.

The gaming companionship farther impressed analysts and investors past reporting that its digital unit, which includes Caesars Sportsbook, missed just $38 zillion in the Sept quarter compared with a year-earlier red of $164 million.

CFRA Says Asset Sale Still Necessary

In what was something of a mild surprise, Caesars direction yesterday told analysts it testament not relocation forrad with marketing single of its Las Vegas Strip assets. Coming into this year, the investiture community of interests widely viewed such a run as essential to the operator’s efforts to pare down debt. Sundaram says plus sales are allay necessary for Caesars.

“In our mean case, we expect the companionship to sell sour assets inward dictate to make up knock down debt and take a leak interestingness payments in 2023, and at best, the companion testament make believe sufficiency operating benefit to make up involvement on its debt. We consider other opportunities inward the gaming blank space with less risk,” according to the analyst.

Even without the do good of an asset sale, Caesars lowered its liabilities to $13.3 billion, as of Sept. 30, down from $13.7 one million million at the oddment of the endorse quarter.