Canaccord Genuity Morning Coffee on Caesars Entertainment (CZR): Hard Ten, Anyone?
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Price: $29.76 +0.40%
Rating Summary:
7 Buy, 22 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
7 Buy, 22 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity Morning Coffee on Caesars Entertainment (Nasdaq: CZR): Hard ten, anyone?
In an article titled “Is Caesars a Sucker’s Bet?” published over the weekend, Barron’s takes a closer look at the company’s recent IPO and its prospects for future growth. While shares jumped 58% on their first day of trading, the article notes that only 1% of outstanding stock was sold in its IPO and that shares are likely to remain volatile until there is a greater float. The casino-operator carries $22.5 billion in debt with interest payments totalling near $2 billion annually. The article points out that some of the company’s debt trades for $0.80 on the dollar and yields 15%. While Caesars’ balance sheet appears weak, its prospectus shows that the company has its World Series of Poker Unit in a separate, debt free unit, implying equity holders will be the beneficiaries of any profits, likely the driving force behind the IPO interest. The company is relying on growth and deregulation in the online gaming space to boost future profits as opposed to its competitors, which have already reaped the benefits of expansion to Macau. Macau currently boasts a gambling market some six times the size of Las Vegas, but Caesars does not have a resort there. Even in Las Vegas, where it has 10 casinos, it had $160 million in capital expenditures in 2010 while rival Wynn Resorts (Nasdaq: WYNN) spent $100 million upgrading just one of its Vegas casinos; implying it is failing to keep up with its rivals on its own turf.
In an article titled “Is Caesars a Sucker’s Bet?” published over the weekend, Barron’s takes a closer look at the company’s recent IPO and its prospects for future growth. While shares jumped 58% on their first day of trading, the article notes that only 1% of outstanding stock was sold in its IPO and that shares are likely to remain volatile until there is a greater float. The casino-operator carries $22.5 billion in debt with interest payments totalling near $2 billion annually. The article points out that some of the company’s debt trades for $0.80 on the dollar and yields 15%. While Caesars’ balance sheet appears weak, its prospectus shows that the company has its World Series of Poker Unit in a separate, debt free unit, implying equity holders will be the beneficiaries of any profits, likely the driving force behind the IPO interest. The company is relying on growth and deregulation in the online gaming space to boost future profits as opposed to its competitors, which have already reaped the benefits of expansion to Macau. Macau currently boasts a gambling market some six times the size of Las Vegas, but Caesars does not have a resort there. Even in Las Vegas, where it has 10 casinos, it had $160 million in capital expenditures in 2010 while rival Wynn Resorts (Nasdaq: WYNN) spent $100 million upgrading just one of its Vegas casinos; implying it is failing to keep up with its rivals on its own turf.
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