fbpx
QQQ
+ 4.33
336.68
+ 1.27%
DIA
-2.13
342.89
-0.63%
SPY
-0.15
422.26
-0.04%
TLT
+ 2.11
138.82
+ 1.5%
GLD
-5.16
176.27
-3.02%

Morgan Stanley: 6 Ways Caesars Entertainment Can Create Value

October 23, 2018 10:30 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

Gaming operator Caesars Entertainment Corporation (NASDAQ:CZR) boasts multiple upside catalysts that imply the stock is undervalued, according to Morgan Stanley.

The Analyst

Morgan Stanley's Thomas Allen initiated coverage of Caesars Entertainment with an Overweight rating and $12 price target.

The Thesis

Caesars shares have lost around 25 percent since the start of 2018 and are trading at just 8.3 times 2019 estimated EBITDAR, which is undervalued given expectations for 7-percent EBITDAR growth per year, Allen said in the Tuesday initiation note. (See his track record here.) 

Reports of an activist hedge fund with a specialty in gaming companies represent a near-term catalyst for the stock, but over the longer-term the company has six potential levers to generate value, the analyst said: 

  • With exposure in 14 states, Caesars is well-positioned to enter the U.S. sports betting market.
  • The casino operator can sell its owned properties for around $2 per share as part of a sales leaseback.
  • The company's loyalty program for gamers is considered the most sophisticated and largest, which positions it well for M&A.
  • A potential $1 per share in value can be generated through cost-cutting, marketing and IT modernization.
  • New licensing agreements can add $1 per share in incremental value.
  • While Caesars isn't a frontrunner to gain a license in Japan, the opportunity does exist and is worth $3 per share.

Price Action

Caesars Entertainment shares were down 4.27 percent at $9.08 at the time of publication Tuesday. 

Related Links:

Credit Suisse: Caesars Entertainment Has Ideal Position In Vegas, Regional Gaming

6 Reasons Why Deutsche Bank Is Bullish On Post-Bankruptcy Caesars Entertainment

For the latest in financial news, exclusive stories, memes follow Benzinga on Twitter, Facebook & Instagram. For the best interviews, stock market talk & videos, subscribe to our YouTube channel.


Related Articles

MGM Resorts, Caesars Entertainment Stocks Upgrade: What You Need To Know

The Las Vegas gaming market seems to be delivering a faster- and stronger-than-expected recovery, with “especially positive booking trends," according to Morgan Stanley. read more

Why KeyBanc Is Bullish On These 4 Casino Stocks

A KeyBanc analyst has initiated coverage on seven companies in the sports betting and casino space, offering a more conservative view of the total addressable market size opportunity. 4 Gaming Picks: KeyBanc analyst Brett Andress named four stocks in the gaming space that he said are attractively priced:  read more

Sports Betting Could Grow 70% In 2021, Casino Recovery Coming: BofA Analyst

Casino, gaming and sports betting stocks had a wild ride in 2020 with the COVID-19 pandemic and the cancellation of major sports seasons and events. Bank of America analyst Shaun Kelley shared his thoughts on the overall sector with a 2021 outlook called, “From shorts to sports.” read more

Caesars Entertainment Gets Downgrade On Valuation, Short-Term Risks

Caesars Entertainment Inc (NASDAQ: CZR) shares are up 109% over the last six months, which has led to a downgrade on valuation and some risks ahead. read more