Unveiling Digital Strategies Set to Enhance Caesars' Stock Worth by 2025
In the gaming and hospitality industry, Caesars Entertainment is gearing up for a potential turnaround in 2025, according to analyst Carlo Santarelli from Deutsche Bank. The bank has set a price target of $56 for Caesars Entertainment's stock in 2025.
Despite the current trading of Caesars Entertainment's stock in the low $30s, the analyst believes the core business, burdened with all debt, is trading at a relatively low multiple of 6.8 times 2025 adjusted EBITDAR. This is due to the $4.4 billion of equity value related to the digital segment being extracted from the enterprise value.
If Caesars achieves the 2025 consensus metrix forecast of $352 million and the digital segment trades at 12.5 times 2025 EBITDA, the business could be worth $20.75 per share. The digital business of Caesars Entertainment, according to Santarelli, could potentially lead to strategic action to unlock value.
The projected incremental property EBITDAR from these assets in 2025, as estimated by Deutsche Bank, is around $75 million. This is expected to be boosted by the opening of the Danville permanent facility in Virginia, the Caesars New Orleans hotel, and property upgrades. The bank believes these incremental EBITDAR figures are likely enough to offset competitive pressures.
Deutsche Bank also expects Caesars's Strip properties to benefit from average daily room rate accretion from investments in Versailles at Paris Las Vegas and Coliseum Tower at Caesars Palace. Meanwhile, the Flamingo Las Vegas investments in food and beverage are expected to drive double-digit growth on more than $200 million of annual EBITDAR.
In 2025, Caesars Entertainment is expected to benefit from over $250 million of interest savings, $200 million of capital-expenditure savings, and $170 million of EBITDAR growth. This, coupled with nearly $550 million of incremental discretionary free cash flow available for Caesars in 2025 relative to 2024, provides optionality for buyback efforts or debt paydown.
Santarelli's $56 price target implies the shares can trade at an 11.9% FCF yield on their 2025 FCF per share forecast. The 2025 equity free cash flow yield (excluding project spend) for Caesars Entertainment is 16.6%, considered attractive by Santarelli.
Despite the competition from Harrah's Council Bluffs and Horseshoe Bluffs Run, Horseshoe Hammond and Harrah's Joliet, Horseshoe Bossier, and Horseshoe Indianapolis, with new openings in Nebraska, Illinois, Bossier, and Terre Haute, Santarelli views Caesars Entertainment as a relative outperformer amongst the Strip operators in 2025.
Deutsche Bank's Las Vegas Strip outlook for 2025 is "measured with modest top-line and margin contraction underpinning the expectations." However, the bank's optimism for Caesars Entertainment is evident in their price target for the company's stock.
A new high-limit slot area at Caesars Palace has produced strong early results, adding to the positive outlook for the company. With these factors in mind, investors might want to keep a close eye on Caesars Entertainment as we approach 2025.
Read also:
- Musk threatens Apple with litigation amidst increasing conflict surrounding Altman's OpenAI endeavor
- Transitioning to Electric Vehicles Places Heavy Demand on Power Grids
- E-mobility continues its progress after a decade since the scandal, staying on course
- The Commission deems the assistance program to be in agreement with the domestic market regulations.
