Caesars Entertainment (CZR) is the IBD 50 Stocks To Watch pick for Thursday as it eyes a new buy point. The casino stock has roared back after crumbling amid the coronavirus crisis, soaring as much as 1,664% above its 2020 lows.
Caesars is the largest casino-entertainment company in the U.S. Its brands include Caesars Palace, Harrah’s, Horseshoe, Eldorado and Silver Legacy. It was formerly known as Eldorado Resorts, but changed its name after acquiring the old Caesars Entertainment in a $17.3 billion deal in 2020.
The firm has been pushing into the sports betting arena, and closed its $3.7 billion deal to buy bookmaker William Hill in April.
Caesars Entertainment Stock Analysis
CZR stock is building a cup base with an ideal buy point of 106.30, according to MarketSmith analysis. This is a third-stage base, which may not produce gains as large as earlier-stage patterns. The stock’s surge of more than 1,600% from the bear market lows also make it more difficult to mount a major price run.
Nevertheless, the stock is trading above its 50-day moving average which is a bullish sign. In addition, its relative strength line is nearing new highs. This gauges a stock’s performance vs. the S&P 500.
The coronavirus pandemic ravaged the company, which posted a loss of $13.51 per share in 2020. However a turnaround is underway, with Wall Street seeing losses narrowing to $3.48 per share in 2021.
Analysts expect the firm to return to profit in 2022, with full year EPS expected to come in at $1.39.
Caesars CEO Tom Reeg touted the impact of Covid-19 vaccinations on its businesses in Q1 when the firm posted results on Tuesday.
“Our first quarter results improved significantly versus the fourth quarter of 2020 as the pace of vaccinations across the country accelerated and consumers started to resume more normal behavior,” he said in a statement.
A key silver lining for Caesars of late is its revenue growth. Sales popped 108%, 153% and 255% in the past three quarters. This is largely attributable to the Eldorado-Caesars merger.
Caesars stock has a decent, but far from ideal, IBD Composite Rating of 71. The stock’s exceptional market performance over the past 12 months helps offset a weak EPS Rating (a dreadful 11 out of 99) due to the company’s losses.
However, big money is snapping up the stock, which suggests institutions see good prospects ahead. In total, 79% of its stock is held by funds, while its Accumulation/Distribution Rating comes in at B. This reflects moderate buying among institutions over the past 13 weeks.
Sports Betting Key For CZR Stock
Union Gaming analyst John McCree rates CZR stock as a buy with a 135 price target. He said the stock is a “catalyst-rich, long-term value creation story” that is still in the “early innings.”
McCree said he has observed a “broad based recovery” underway in the Las Vegas and regional markets, which is key for the stock. He also said the firm is keen to bet big on sports betting, a fact underlined by its acquisition of William Hill.
“CZR leadership understands the investment required to be a major contender in the U.S. online gaming and sports betting space and is committed to spending the necessary resources and capital, albeit smartly,” he said in a research note. “There is certainly a need to execute between now and the upcoming NFL season this fall, but we remain confident this team is up to the task.”
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
YOU MIGHT ALSO LIKE: