Caesars Entertainment Corporation: 5 Year Outlook
Caesars Entertainment Corp(NASDAQ: CZR) is one of the most established casino operators in the United States. It saw remarkable growth over the course of 2013 but in this first half of 2014, Caesars Entertainment Corp has been in a bit of a slump. The stock is down but not out. Recent moves into global markets as well as online gambling should play out well for the company and revitalize the stock.
Burdened by Debt
Before taking a look at what Caesars Entertainment Corp is doing to turn itself around, it’s necessary to see what brought the stock into its current slump. Earlier this year, word got out that a unit of Caesars Entertainment Corp was at risk of defaulting on approximately $23 billion worth of debt.
The large debt and the threatening possibility that the company will be unable to meet its debt obligations have caused analysts and investors alike to become bearish about the stock. However, Caesars Entertainment Corp is well aware of the problem it is facing and is taking strides to handle it.
At the end of May, the company revealed new terms of ownership for intellectual property and loyalty rewards programs. In the past, these were wholly owned by Caesars Entertainment Operating Company, the debt laden unit of Caesars Entertainment Corp. Now, ownership will be divided across three units to better distribute the burden and make the debt more manageable.
Legal Tie Ups
Part of Caesars Entertainment Corp’s future hinges on the outcome of a lawsuit filed at the end of 2013 against the Massachusetts gambling chief. The company alleges that the gambling chief failed to disclose a possible conflict of interest in considering its application for a casino license in the state. Furthermore, Caesars Entertainment Corp alleges that the gambling chief held the company to higher standards than he did its competitors.
This year, the court ruled to dismiss the lawsuit on technical grounds. However, Caesars Entertainment Corp is in the process of appealing that decision. Should the appeal be granted and the lawsuit won, this will have a positive effect on the company’s stock and overall financial wellbeing.
The Deal with Asia Miles
In May of this year, Caesars Entertainment Corp agreed to a partnership with Asia Miles. Asia Miles is one of the top travel and lifestyle reward programs. Under the terms of the new partnership, Asia Miles will offer greater rewards to its members who stay at any of the hotels or resorts operated by Caesars Entertainment Corp.
The company’s stock was up more than 13% on the news of the new partnership.
Breaking into Online Gambling
In the interest of remaining competitive on all fronts, Caesars Entertainment Corp has launched the online World Series of Poker website where residents of states which allow gambling online with real money will be allowed to gamble from the comfort of their own home.
The World Series of Poker brand is already successful as a popular gambling event so it is strongly believed the online debut will be a great success. Online gambling with real money is still a relatively new market. This website will mark only the second company to enter Nevada’s online gambling world (the first being the Station Casinos, Ultimate Poker partnership early last year). The market is expected to grow to as much as $8 billion by 2020.
The expansion is, however, impeded at the moment by disagreements about what sort of regulatory measures should be in place and the current dominance of offshore gambling websites. The good news for Caesar Entertainment Corp is that with a brand as recognizable as the World Series of Poker, its website has a high possibility of success.
While there is still some reasonable doubt about the company’s financial stability, Caesar Entertainment Corp is making some strong strategic moves to turn itself around. Whether or not these are strong enough, however, remains to be seen. But the extreme pessimism currently expressed by the market is likely exaggerated.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.