What to Know About Caesars’ New Risk Factors

Nevada-based Caesars Entertainment (CZR) is a hotel and casino entertainment company. It acquired sportsbook operator William Hill April and divested its U.K. business in July. Let’s take a look at Caesars’ latest financial performance and risk factors.

Caesars’ Q2 Financial Results

The company reported its second-quarter financial results on August 3. Net revenue increased to $2.5 billion from $127 million a year ago, and beat the consensus estimate of $2.22 billion.

Additionally, adjusted earnings per share of $0.34 was reported, compared to an adjusted loss per share of $1.25 a year ago. Analysts had expected the company to report a loss per share of $0.30. Notably, the company ended Q2 with $1.1 billion in cash and $14.7 billion in debt.

Following the Q2 results, Caesars’ CFO Bret Yunker commented, “We anticipate that our balance sheet will be further enhanced through improved operating trends and expected asset sale proceeds.” (See Caesar stock charts on TipRanks).

Caesars’ Risk Factors

According to the new TipRanks Risk Factors tool, Caesars now carries 37 risks, up from 26 previously. Finance and Corporate, and Tech and Innovation are the top risk categories each at 24% of the total risks. The Ability to Sell, and Legal and Regulatory are the next two major risk categories at 16% and 14%, respectively.

Since June, Caesars has amended its risk profile to introduce 11 new risk factors. A newly added Tech and Innovation risk factor warns investors that the company’s digital operations, such as online betting, may be affected by infrastructure issues that cause service outages. It tells investors that William Hill has experienced technical problems before and those challenges may reoccur in the future.

A newly added risk factor under Finance and Corporate category highlights the potential adverse consequences of Caesars relying on third parties. For example, the company says that it partners with sports leagues, professional athletes, and others to attract people to its offerings. It cautions that if any of these partners decide to enter into exclusive arrangements competitors, Caesars’ ability to offer certain services may be adversely affected.

Caesars’ Tech and Innovation risk factor is above the sector average at 24% versus 13%. But its Finance and Corporate risk factor is below sector average at 24% versus 41%. The company’s shares have gained about 22% since the beginning of 2021.

Analysts’ Take

Following Caesars’ Q2 report, Jefferies analyst David Katz reiterated a Buy rating on CZR stock and raised the price target to $130 from $128. Katz’s new price target suggests 44.9% upside potential.

Consensus among analysts is a Strong Buy based on five Buys and one Hold. The average Caesar price target of $127.33 implies 41.7% upside potential from current levels.