Caesars Entertainment Gets Downgrade On Valuation, Short-Term Risks

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

The Caesars Analyst: Morgan Stanley analyst Thomas Allen downgraded Caesars from Overweight to Equal-Weight and kept a price target of $67.

The Caesars Thesis: Allen sees a difficult winter ahead for Caesars due to worsening COVID-19 conditions and several states closing casinos.

“While CZR has attractive long-term opportunities in sports betting/online gambling and transaction synergies, we see near-term earnings risk from rising Covid-related restrictions exacerbated by high leverage,” Allen wrote in a note.

The high debt load from Caesars is an area to watch, according to the analyst, as it puts pressure on upcoming earnings.

Related Link: Wynn, Caesars Report Latest Brutal Casino Earnings

Allen has a $128 bull case price target on Caesars and sees recent acquisitions and sports betting as synergies.

The note mentions deals by Caesars for Eldorado and William Hill and says the sports betting segment of the company is receiving minimal value.

The analyst does see some upside ahead in 2021: "We expect strong pent-up demand once the US population is widely vaccinated."

CZR Price Action: Shares of Caesars are down 1.6% to $68.97 on Wednesday.