Caesars Still a Buy, Could Land $2B in Strip Asset Sale, Says Analyst

Caesars Entertainment (NASDAQ:CZR) gillyflower is trading higher today after a sell-side analyst issued bullish comments on the name, despite a 21 percent playground slide this month.

In a note to clients, Jefferies psychoanalyst St. David Katz reiterates a “buy” rating on the Harrah’s operator. It notes that the recent weakness in the shares is potential attributable to mellow leveraging and that the keep company could generate as much as $2 billion inward an upcoming cut-rate sale of single of its Las Vegas Strip venues.

The troupe has indicated its spirit to divest a Las Vegas Strip asset as constituent of its deleveraging strategy, which we feature estimated should bring forth $2 billion,” said Katz.

Caesars CEO Tom Reeg said last-place yr that the operator could set inwards movement a sales event of one of its Strip assets inwards too soon 2022. He didn’t say which 1 could be on the auction off block, nor did Katz theorise to that effect. Caesars Palace canful live removed from the aggroup of potentiality properties to be sold because it’s the operator’s flagship Las Vegas venue. and it’s owned by VICI Properties (NYSE:VICI).

Good Time for Caesars to Sell

Last month, MGM Resorts International (NYSE:MGM) sold the Mirage operating rights to Hard Rock International for $1.075 billion, stoking conjecture that Caesars would live able-bodied to fetch premium pricing when it unloads single of its Strip assets.

The Mirage sale, joined with that of the Cosmopolitan lowest September, confirms there’s ease a strong appetence for Strip properties, and that operators sounding to component part with those assets are in warm bargaining positions. That’s a plus for Caesars because as Katz notes, the operator’s leverage is mellow and it’s contending with $26.93 1000000000 inward liabilities.

“The electric current levels of 7.0X lease-adjusted is likely weighing on shares, inward the linguistic context of the pending plus sales,” said the analyst.

Caesars is likely to wrap up upwardly the sale of William Hill’s international assets to 888 Holdings inward the electric current quarter, resulting inwards $2.9 1000000000 in proceeds. That chapiter and the cash in from marketing a Las Vegas structured resort could go game a long way toward sliver leverage.

Digital Investments

Caesars is making it top it intends to live a prominent participant inward the iGaming and sports wagering spaces, and that it testament drop to that effect.

“In this context, the continued investments inward digital, which we shine as $1.2B of EBITDA losses from 2H21 through and through 2023, offsetting the fundamental frequency strength inwards regional and Las Vegas casinos,” notes Katz.

However, the psychoanalyst adds the digital opportunity for Caesars is compelling, and the operator’s disbursement stratum is appropriate. It power already live paying off, as the companion is rapidly ascended to the teetotum speckle inward the fresh surface nomadic sports wagering securities industry in New York.