Century Casinos found itself in the red on April 10 following the release of higher-than-expected US Consumer Price Index (CPI) figures, signaling concerns about persistent inflation. However, despite the market’s reaction, one analyst remains optimistic about the company’s prospects.

Macquarie Analyst Predicts 53% Upside for Century Casinos

Macquarie analyst Chad Beynon, in a recent report to clients, upgraded Century Casinos from “neutral” to “outperform,” setting a price target of $5 per share. This represents a potential upside of nearly 53% from the current closing price of $3.27. Beynon believes that the recent selloff in Century’s stock, which has seen a 32% decline since the end of last year, is unwarranted.

While the broader market has seen modest gains, Century Casinos’ stock has experienced a significant decline, making it the cheapest operating company in Macquarie’s coverage universe. Beynon attributes this undervaluation to market misconceptions, particularly regarding Century Casinos’ real estate ownership structure.

Century Casinos, operating primarily in regional markets, has faced headwinds but also possesses significant growth potential. Beynon forecasts the company to achieve $168 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on revenue of $700 million next year. 

Notably, Century Casinos could generate 85 cents per share in free cash flow, an impressive feat given its current market capitalization of $101 million.

The analyst identifies several catalysts that could drive Century Casinos’ rebound, including the opening of The Riverview, Poland’s re-licensing, and the completion of Caruthersville. Additionally, recent acquisitions such as Rocky Gap and Nugget are expected to contribute to medium-term growth.

Strategic Moves Propel Century Casinos Amid Leverage Challenges

Despite concerns about rising leverage due to expansion plans, Beynon remains confident in Century Casinos’ ability to deleverage, marking it as the largest one-year deleveraging opportunity in Macquarie’s coverage. 

The company’s renovation projects and strategic acquisitions are anticipated to yield attractive returns, positioning Century Casinos as a unique value and growth opportunity in the market.

Notably, Century Casinos reported strong fourth quarter and full year 2023 results, with a notable increase in adjusted EBITDAR and net operating revenues.

Despite a slight dip in earnings from operations for the year, the company’s expansion efforts in the US and successful acquisition strategies position it for a bright future, according to co-CEOs Erwin Haitzmann and Peter Hoetzinger.However, investors may need to exercise patience, as Century Casinos’ resurgence is projected to be a 2025 story. However, with a strong earnings outlook and potential catalysts on the horizon, the company’s long-term prospects appear promising.

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Caesars Entertainment has become a focal point for stock analysts as differing opinions on the company’s future trajectory emerge. 

JMP Securities Bullish on Caesars with a $65.00 Price Target

JMP Securities initiated coverage on January 9, offering an “outperform” rating and setting a $65.00 price target on the stock, reported financial news media outlet Marketbeat. This upbeat assessment suggests a potential upside of 40.54% from the current price. In contrast, JPMorgan Chase & Co. lowered their price target to $54.00, implying a more conservative 19.87% upside.

Analysts closely watched the company’s quarterly earnings data released on October 31, 2023, where Caesars beat consensus estimates with $0.34 earnings per share, higher than the expected $0.27. The company reported revenue of $2.99 billion, exceeding analysts’ expectations of $2.94 billion.

Noteworthy insider activity has occurred, with Director Michael E. Pegram purchasing 15,000 shares at an average price of $41.90, totalling $628,500. This move reflects confidence in the company, as Pegram now holds 136,697 shares valued at approximately $5,727,604.30.

Large institutional investors have also made adjustments to their positions in Caesars. Soros Capital Management increased its stake by 0.4%, while Czech National Bank and Creative Planning raised their positions by 0.8% and 2.6%, respectively. These moves indicate a mix of confidence and caution among institutional players.

Caesars Faces Price Target Cuts from JPMorgan and Morgan Stanley

JPMorgan Chase & Co. was not the only one to lower its price target for Caesars. Morgan Stanley also reduced it from $48 to $45, indicating a modest downside. 

Of the 16 analysts covering Caesars, 12 rated it as a “strong buy” or “buy,” while four rated it as “hold.” The consensus price target of $61.94 implied a potential upside of 36.55%, but some analysts highlighted the possibility of downward revisions. 

At the same time back in December, Barclays analyst Brandt Montour favored Penn National Gaming (PENN) and Caesars Entertainment as top gaming picks for 2024, citing Penn’s success with ESPN Bet and Caesars’ underappreciated deleveraging and robust free cash flow. 

However, analysts have also made other projections. According to analyst Shaun Kelley from Bank of America, Caesars Entertainment may divest two of its Indiana properties, Horseshoe Indianapolis and Harrah’s Hoosier Park, to reduce financial liabilities. The potential sale, estimated to raise nearly $2 billion in net proceeds, could involve VICI Properties as the buyer, with the analyst suggesting this move would align with Caesars’ focus on reducing leverage and achieving targeted financial ratios.

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Divestment of assets isn’t uncommon for gambling operators across the globe. If a certain digital asset is a burden or a specific property is underperforming, operators often explore a wide range of options, including potential sales or mergers.

Currently, the leading gaming and entertainment company, Caesars Entertainment, has four casinos across Indiana. The list of properties includes Caesars Southern Indiana Hotel and Casino, Horseshoe Hammond, Harrah’s Hoosier Park Racing and Casino and Horseshoe Indianapolis.

An ongoing focus for Caesars is to reduce its financial liabilities. The potential sale of two of its Indiana properties is one way this can be achieved, an analyst suggests. Shaun Kelley, a senior research analyst for Bank of America, recently revealed that Caesars may consider divesting two of its casinos.

The venues that may be sold are Horseshoe Indianapolis and Harrah’s Hoosier Park. The divestment of the two properties is expected to raise close to $2 billion in net proceeds for Caesars, Kelley estimates. Additionally, the analyst explained that the finalization of the company’s projects in Danville and New Orleans may further boost its growth.

“We expect this sale to raise nearly $2 billion in net proceeds that should reduce traditional and lease-adjusted leverage below five times and close to their targeted range.“

Shaun Kelley, senior research analyst for Bank of America

Possible Buyer Is VICI Properties

The sale of two of Caesars’ casinos in Indiana may be completed by divestment of Centaur Holdings, the holding company of the two properties. The potential buyer, according to the analyst, could be VICI Properties, the owner and acquirer of real estate assets within the hospitality, gaming, leisure and entertainment sectors.

Despite Kelley’s prediction, Caesars is yet to confirm or reject the possible divestment of assets in Indiana. With the start of the year, the leading gaming and entertainment company confirmed the date when it will be releasing its financial results for the fourth quarter and full year 2023. At the time, Caesars said that its results would be released upon market close on Tuesday, February 20, 2023.

On the same day, the company will also host a conference, discussing its latest results as well as other important matters. If Caesars considers the aforementioned divestment, it may be one of the topics up for discussion on that day.

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The leading gaming, hospitality and entertainment giant, MGM Resorts International, became a victim of a cyberattack back in September. At the time, the operator confirmed issues with bookings, hotel electronic doors, some slot machines, as well as other amenities. After the initial attack, MGM was able to recover and resume its operations while at the same time rejecting the option to pay ransom.

The cyberattack impacted MGM’s performance, resulting in a dip in its shares. Currently, the company’s stock trades in the $36 range. However, one analyst predicted a rebound and remained optimistic about MGM’s future performance, despite the devastating attack. As announced by CDC Gaming Reports, Carlo Santarelli, an analyst for Deutsche Bank, remains optimistic about MGM, explaining that the cyberattack only briefly impacted the company’s performance.

Speaking about the current stock, the analyst said it is “very cheap.” Yet, Deutsche Bank’s assessment of MGM’s target price stock remains high, decreasing slightly from $57 to $56. This assessment comes ahead of the release of the operator’s third quarter results which are expected on November 8, 2023, and takes into consideration the recent cyberattack.

Earlier this month, MGM confirmed it expects the impact of the cybersecurity issue to be reflected in its Q3 2023 earnings. At the time, the company estimated a reduction of approximately $100 million in adjusted EBITDAR for September. With that in mind, Santarelli explained: “The impact from one-time expenses related to the breach is expected to be less than $10 million in the third quarter, and we do not believe these expenses will be reflected in adjusted EBITDAR, as they are expected to be covered by insurance.”

Impact of Cyberattack Evident in September’s Results

The analyst spoke about the impact of the cyberattack on the third quarter results. Still, Santarelli said that the results in September were primarily impacted by the cyberattack but figures from July and August remained “essentially flat.”

While MGM’s performance was impacted last month with occupancy decreasing to 88%, lower than the 93% recorded for the corresponding period in 2022, performance this month is expected to be nearly on par. MGM is expected to report occupancy for October of 93%, slightly below the October 2022 result of 94%.

“The deceleration in the third quarter, however, was largely a result of September performance and we believe primarily relates to the cyber-security incident, as well as the reporting of GGR related to the incident.“

Carlo Santarelli, analyst for Deutsche Bank

Recently, another analyst predicted that MGM will quickly recover from the cyberattack. David Katz, an equity analyst predicted that the company’s stock is likely to rebound in the near future, hitting $69. Moreover, he explained that the cybersecurity issue isn’t likely to impact the business in the long term.

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Several weeks ago, the casino giant MGM Resorts suffered a devastating cyberattack that forced it to shut down multiple systems. In the wake of the attack, the company was warned that its credit score might be lowered while its stock plummeted. Equity analyst David Katz, however, is optimistic that the casino juggernaut will make a quick recovery.

According to Katz, the casino and hospitality company’s stock, trading for $36.93 as of the time of this writing, is likely to rebound to $69 in the near future.

Katz told investors that the cyberattack is a singular event that is unlikely to affect MGM’s business in the long term. While the attack is certainly going to impact the casino company’s Q3 and probably Q4 results, much of the impact is likely to be covered by insurance, leaving the 2024-2025 time frame intact.

Katz has decreased his estimates for MGM Resorts’ Fiscal Year 2023 results. Previously projecting $15.461 billion in revenue and $4.642 billion in adjusted cash flow, the analyst now projects $15.251 billion in revenue and $4.51 in adjusted cash flow.

MGM Is Poised for Quick Recovery

Commenting on the attack, Katz said that it was the result of a single human error. In any case, the attack, which was part of a larger operation affecting several companies, presents a “set of issues on how companies deploy resources to mitigate risk,” Katz added.

In addition, he pointed out that the presence of insurance provides MGM with a lifeline that will likely prevent a lingering impact on its shares. The upcoming Formula One Las Vegas Grand Prix and Super Bowl game in Las Vegas will likely make up for much of MGM’s losses, Katz predicted.

Katz concluded that MGM Resorts is poised for success in Las Vegas and is already recovering in Macau, sparking optimism about future trading.

In other cyberattack-related news, MGM Resorts recently contacted its loyalty members, promising them that their loyalty will be rewarded “to the fullest and more.” The company asked its customers to remain patient and be on the lookout for further announcements.

Despite MGM’s best efforts to make things right, certain MGM players launched lawsuits against the company because their data got compromised. Affected Caesars Entertainment customers launched similar lawsuits.

Speaking of Caesars, the MGM competitor recently offered two years of IDX services to its loyalty program members whose data got compromised.

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