On Thursday, JPMorgan analysts revised the price target for Caesars (NASDAQ:CZR) Entertainment (NASDAQ:CZR) stock, reducing it slightly to $57.00 from the previous target of $58.00.
Despite the adjustment, the analysts maintained an Overweight rating on the stock. Their decision follows a review of the company's fourth-quarter earnings estimates, particularly focusing on the Las Vegas Strip and digital operations.
In its assessment, JPMorgan noted a downturn in the fourth-quarter Las Vegas Strip EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring or Rent Costs), adjusting the figure to $485 million from the earlier estimate of $499 million. This projection remains relatively consistent with the previous year's $489 million. The revision is attributed to anticipated mid-single digit declines in gaming volume and a quarter-over-quarter dip in margins by 40 basis points to 44.0%.
The analysts pointed to weaker year-over-year volumes in November, which were influenced by a less successful Formula 1 event compared to the previous year. However, they suggested that the performance in December on the Las Vegas Strip was likely satisfactory, without providing specific figures.
Additionally, the price target adjustment takes into account the expected lower performance in Caesars' fourth-quarter digital operations. JPMorgan has halved the Digital EBITDAR estimate to $26 million from $51 million. The reduction is based on the assumption of a lower-than-anticipated Online Sports Betting (OSB) hold due to favorable football results in December, where the favored teams frequently won and covered the spread. The analyst anticipates this trend to be a common theme among OSB operators during the earnings season.
Despite these adjustments, JPMorgan has not altered its $408 million Regional EBITDAR estimate for the fourth quarter of 2024. The firm believes that the operations in New Orleans and Danville will balance out any variance in same-store sales.
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