Citing a poor showing at the 2024 Las Vegas Grand Prix, analyst Joseph Greff of J.P. Morgan has revised his cash-flow projections for Caesars Entertainment for the fourth quarter. Projections for the Strip and digital segments were revised as a result of the event’s failure to match the excitement and financial impact of its 2023 debut.
Revised Forecasts Highlight Challenges
In a January 2 investor note, Greff lowered Caesars’ stock price target from $58 to $57. He also adjusted the Q4 Strip cash-flow projection from $499 million to $485 million, a near match to the $489 million recorded during the same period in 2023, according to CDC Gaming.
The forecast reduction reflects modest declines in gambling volume, normal table game holds of 22%, and compressed margins. The 2024 Las Vegas Grand Prix, which lacked the excitement of its inaugural year, contributed significantly to the tempered outlook.
On the digital front, Caesars Digital saw its online sports betting (OSB) return on investment downgraded to $26 million from $51 million. This drop stemmed from customer-friendly results in December, which analysts suggest could impact other operators’ earnings.
Despite setbacks in Las Vegas and digital operations, Caesars found success in its regional markets. The opening of its new casino in Danville, Virginia, and the rebranding of Caesars New Orleans offered positive momentum during the quarter. These developments bolstered the company’s regional segment and partially offset weaker Strip and digital performance.
Greff maintained a $1.86 billion cash-flow prediction for Strip operations, while slightly lowering regional forecasts by $10 million to $1.82 billion. He upheld his $354 million digital ROI forecast despite the OSB adjustments. Corporate expenses for the year increased to $190 million, although interest expense forecasts dropped from $800 million to $756 million.
While noting the absence of strong near-term catalysts for Las Vegas operators, Greff remained optimistic about Caesars’ overall value. He described its shares as offering a “solid medium-term risk/reward,” adding, “We don’t see a great dynamic to be massively negative for any period of time either.”
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