Nelson Barnard
Caesars Entertainment (Nasdaq:CZR(It calmed down a bit on Monday after a big rally last Friday when Bloomberg reported that billionaire activist investor Carl Icahn had taken a stake.
Carl Icahn is a well-known name in the casino industry with a proven track record This includes owning stakes in the former Caesars and the new Fontainebleau property on the Las Vegas Strip. Icahn took a roughly 20% stake in Caesars after the casino company struggled. His presence contributed to Caesar (Czechoslovakia) Consider strategic alternatives and eventual sale of Eldorado Resorts. Carl Icahn acquired the unfinished Fontainebleau Las Vegas resort for $150 million in 2010 during the recession, paying just 10% of construction costs. Icahn held the property for six years with minimal expenses, compounding the real estate cycle. In 2017, Icahn sold the Fontainebleau Hotel for $600 million, realizing a $450 million profit as his struggling real estate strategy paid off.
Bank of America analyst Sean Kelly said the company believes Icahn's new stake in CZR is an endorsement of the current valuation at 6.6 times 2025 EBITDAR estimates and a 20.0% free cash flow yield on maintenance capex. The legendary investor is believed to be looking beyond the ongoing headwinds for the regional casino part of the business. The company has a price target for Caesars Entertainment (CZR) of $50, which is based on approximately 7.5x 2024 EV/EBITDAR estimates. This multiple is noted to be slightly below the long-term historical average and mid-cycle multiple for CZR.
Caesars Entertainment (CZR) shares are down. 0.22% to $35.46 in afternoon trading on Monday. Casino shares are trading at the lower end of its 52-week range of $31.74 to $60.27. Short interest in CZR is 8.0% of the total float, the second highest in the casino sector after PENN Entertainment (PENN).