During Global Gaming Expo week, analysts for Deutsche Bank sat down for lunch with unnamed senior Caesars Entertainment executives and got up from the table with a strong appetite for CZR stock.
“As expected, much of the focus of the discussion centered on the August launch of the sports betting marketing programming and the measures of success within the business over the near to medium term,” wrote lead analyst Carlo Santarelli.
Caesars brass downplayed results in Pennsylvania and Illinois, where their sports books have yet to migrate to the Liberty platform (an inheritance from the William Hill acquisition). They preferred to emphasize performance in Arizona, Tennessee, Virginia, Indiana, Iowa, Indiana, and New Jersey, “states in which the Liberty platform is up and running and customer acquisition and marketing pushes are well underway.”
Santarelli laid particular emphasis on Arizona, due to its synchronized sports betting operator launches, predicting that Caesars would capture market share in the double digits, due to its long tribal relationship at Harrah’s Ak-Chin and database-marketing strength. Indiana and number-one market New Jersey will be “a slower grind,” Santarelli wrote, but Caesars could climb into the top four operators in both states.
In light of the fact that Caesars had already released most of its third-quarter results and indicated that September had tracked along similar (positive) lines, Santarelli foresaw few surprises. There would, he noted, be adverse results in Louisiana, Lake Tahoe, and Atlantic City, which “all experienced exogenous weather or events in the period,” but not setbacks that would be material in the larger picture.
Citing gains in sports-betting market share, sequential improvements on the Las Vegas Strip, potential asset sales, and debt refinancing, Santarelli reiterated his “Buy” rating.
“We continue to like the operational improvement, sports betting market share growth, asset sale, and swift debt reduction elements of the CZR story. Further, we believe relative valuation speaks to the potential for further upside as CZR shows progress in the sports betting initiative.”
