Here's Why You Should Retain Caesars Entertainment (CZR) Stock
Caesars Entertainment, Inc. CZR is likely to benefit from pent-up consumer demand, tech enhancements and capital development projects. Also, the focus on sports betting expansion bodes well. However, increased operating expenses and construction-related disruptions remain headwinds.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Factors Driving Growth
The company continues to benefit from robust occupancy. During third-quarter 2023, occupancy in Las Vegas grew 300 basis points (bps) year over year to 96.6%. Attributes such as strong leisure and casino guest demand, along with the return of international guests, added to the positives. Caesars Entertainment revealed that it began witnessing the pre-COVID return of conventions and groups to Las Vegas. The company is optimistic about booking trends, witnessing increased bookings for group and convention room nights. It expects the return of the group and convention business and entertainment offerings to drive incremental demand in the Las Vegas market.
CZR focuses on certain tech enhancements to boost product offerings and drive better customer engagement. During the third quarter of 2023, the company initiated the rollout of a new stand-alone iCasino app, Caesars Palace Online. It also launched several new product features for football, including SGPs for NCAA, a live streaming product for nationally broadcast NFL games, a bet with reward credits feature and improved payment options.
During the third quarter, revenues from Caesars Digital came in at $215 million compared with $212 million reported in the prior year quarter. During the quarter, sports betting hold improved 14% year over year and iCasino volume increased 38% year over year. Also, it generated $2 million of adjusted EBITDA against a $38-million adjusted EBITDA loss in the prior-year quarter.
The company stated benefits from increased state or jurisdictional legalization, new product launches and improved customer adoption. As of Sep 30, 2023, the company operated sports betting in 30 jurisdictions in North America, out of which 24 offer mobile sports betting. Also, it stated the availability of iGaming offerings in six jurisdictions.
The company is inclined to expand in new markets to drive growth. During the third quarter of 2023 earnings, it stated plans to expand in Nebraska by developing Harrah’s Hoosier Park property, which is expected to open in fourth-quarter 2023. The casino development is expected to feature a new one-mile horse racing surface, a 40,000-square-foot-casino and sportsbook (with more than 400 slot machines and 20 table games) and a restaurant and retail space. The company also expects Versailles Tower rooms in Vegas to be available online by the end of 2023. The company is optimistic about the progress made on property developments and anticipates delivering strong returns in the upcoming periods.
Concerns
An increase in operating expenses is likely to affect the company’s profits. During the third quarter, food and beverage expenses came in at $266 million compared with $240 million reported in the prior-year quarter. Hotel expenses during the quarter came in at $146 million compared with $142 million reported in the prior-year quarter. Total operating expenses during the quarter were $2,270 million, up from $2,228 million in the prior-year period. The company intends to monitor the economic situation to gauge the impacts of inflation and interest rate hikes.
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The company has been witnessing increased competition associated with the opening of new casino resorts in regional markets. Also, construction disruption from renovation projects has impacted visitation. Moving ahead, it anticipates the challenges will persist for some time. Shares of the company have declined 16.1% in the past three months compared with the industry’s fall of 8.3%.
Zacks Rank & Key Picks
Caesars Entertainment currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector include:
Royal Caribbean Cruises Ltd. RCL sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.3% on average. Shares of RCL have surged 76.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates a rise of 57.7% and 187.9%, respectively, from the year-ago period’s levels.
Live Nation Entertainment, Inc. LYV sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 37.5% on average. Shares of LYV have increased 20.4% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS indicates a rise of 28.7% and 137.5%, respectively, from the year-ago period’s levels.
Skechers U.S.A., Inc. SKX carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 50.3% on average. Shares of SKX have increased 42.5% in the past year.
The Zacks Consensus Estimate for SKX’s 2023 sales and EPS indicates a rise of 8.2% and 44.5%, respectively, from the year-ago period’s levels.
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Caesars Entertainment, Inc. (CZR) : Free Stock Analysis Report
