Updated Aug 14 at 10:52am ET.
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The interest rate on 30-year US government bonds has reached its highest level since 2001. When these rates rise, it generally makes it more expensive for companies to borrow money or refinance the debt they already have.
This matters for Caesars because the company carries a heavy debt load of about 11.9 billion dollars. Since a major part of our view on the stock depends on the company using its cash to pay down that debt, higher borrowing costs across the economy could make that process slower and more expensive.
TD Cowen has lowered its rating on the company to Hold. This change comes just after the company reported its second-quarter results and confirmed it is being acquired by billionaire Tilman Fertitta. When a stock is downgraded to Hold, it often means the analyst sees limited room for the price to go up from here or believes the upcoming acquisition price has already been factored in.
The company reported a loss of 30 cents per share, which was worse than the small profit analysts expected. Total revenue reached about 3 billion dollars, up slightly from last year. While regional casinos saw growth, revenue from Las Vegas properties fell about 3.5 percent. This is a key area to watch because these iconic resorts carry high fixed costs and need high occupancy to stay profitable.
The digital division, which includes online sports betting and gaming, brought in 68 million dollars in adjusted earnings. This is a slight drop from last year but shows the online business is still contributing cash. The results were overshadowed by the news that the company has agreed to be acquired by Tilman Fertitta for 5.7 billion dollars, which likely sets a ceiling for the stock price in the near term.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Barclays has lowered its rating to Equal Weight, which is their version of a Hold. The firm also set a price target of 31 dollars. This suggests the analyst believes the stock is now fairly valued and may not have much room to grow compared to other companies in the same industry.
Source: Barclays
The company filed an 8-K notice to report a change in its leadership team or board of directors. These filings are required when a high-level executive or director joins or leaves the company. While the filing did not immediately change the company's operations, leadership shifts are important to track during a period where the business is preparing to be acquired.
Source: 8-K filing
Analysts have recently downgraded the stock following its second-quarter earnings report. Only 10 of 31 analysts rate it a buy, and the average target of $31 suggests the stock is fairly valued with only 5% upside.
The company has missed analyst profit targets in seven of the last eight quarters. This suggests the business is harder to forecast than Wall Street expects or that costs are consistently higher than hoped.
| Expectation | |
|---|---|
| EPS | $-0.07 |
| Revenue | $2.98B |
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