Caesars Entertainment Asset Sale Coming In At Higher Price And Could Bring More Upside

After a large acquisition in the casino and online gaming space, Caesars Entertainment Inc (NASDAQ: CZR) put an asset up for sale. It has attracted higher bids than expected, leading to a bullish callout from an analyst.

The Caesars Entertainment Analyst: Bank of America analyst Shaun C. Kelley maintains a Buy rating and has a $125 price target on Caesars Entertainment.

Related Link: Caesars Confirms $3.7B Offer For William Hill, Here's Why It's Important

The Analyst Takeaways: An acquisition of William Hill’s non-U.S. operations is coming in at a better price than reported, according to Kelley.

Reports say Caesars is nearing a deal to sell the non-U.S. business of William Hill for $2.76 billion to 888 Holdings. This comes in higher than previous estimates. Reports also say Apollo Global is in talks with Caesars and that the bidding process is not over, which could bring in a higher bid.

Caesars announced a $3.7 billion acquisition of William Hill, an online gambling company, last year.

“The sale of these assets was an expected catalyst but the timing comes slightly earlier than we anticipated with pricing potentially well above expectation,” Kelley said.

The analyst had modeled a purchase price of the assets at $1.8 billion. The result of a better acquisition price could add over $5 a share in upside potential, the analyst notes.

“We suspect could be used to help accelerate either deleveraging, investment in online gaming/omnichannel growth or both.”

The analyst sees the sale as a major boost to Caesars Entertainment. The next catalyst could be the shrinking size of the company’s Las Vegas footprint, which Kelley sees happening in 2022 with additional asset sales.

A $125 price target is based on 13.5x EV/EBITDA of fiscal 2022 EBITDAR.

CZR Price Action: Shares are trading down 2.47% to $104.72 on Wednesday morning.

Photo by Aidan Howe on Unsplash