Carl Icahn Takes Major Position in Caesars Entertainment

Key Points

• The announcement of Carl Icahn's significant position in Caesars Entertainment reignited interest and speculation around the company, causing its stock to jump as high as 15%.
• Despite financial challenges and a 24.15% year-to-date stock decline, analysts remain optimistic about Caesars, with a moderate buy rating and a potential 55% upside.
• The news of Icahn's involvement has provided relief to the stock, which closed the week up nearly 10% in a rare green week.

Activist investor Carl Icahn has made headlines again with a significant position in casino operator Caesars Entertainment NASDAQ: CZR. This revelation caused a notable surge in Caesars' stock, which jumped 15% following the announcement. While the exact size of Icahn's stake remains undisclosed, his involvement has reignited interest and speculation around the company.

Icahn's history with Caesars is well-documented. In February 2019, he disclosed a 9.78% stake and urged the company to consider a sale after it rejected a merger proposal by Tilman Fertitta, owner of Golden Nugget Casinos. Icahn’s push led to significant changes, including appointing three new directors to Caesars' board and the eventual sale to Eldorado Resorts for $8.5 billion in cash and stock in July 2020. Despite having dissolved his stake post-merger, Icahn's renewed interest signals potential strategic moves on the horizon for Caesars Entertainment.

Analysis of Caesars Entertainment

Caesars Entertainment, Inc., founded in 1937 and based in Reno, Nevada, operates as a leading gaming and hospitality company. It manages properties in 18 states, featuring slot machines, video lottery terminals, e-tables, hotel rooms, and table games like poker. 

Additionally, Caesars conducts retail and online sports wagering across 31 jurisdictions in North America and operates iGaming in five jurisdictions. The company's portfolio also includes dining venues, bars, nightclubs, lounges, hotels, and entertainment venues, along with providing staffing and management services.

Despite its extensive operations, Caesars has faced financial challenges recently. On April 30th, 2024, the company reported disappointing first-quarter earnings with a $0.55 per share loss, missing the consensus estimate of a $0.03 loss by $0.52. Revenue for the quarter was $2.74 billion, falling short of analyst expectations of $2.82 billion. These results highlight ongoing difficulties, particularly in the Las Vegas segment, which has been affected by low table hold.

Caesars Technical View and Analysts' Perspectives

From a technical analysis standpoint, Caesars' stock has been underperforming the sector and the overall market, down 24.15% year-to-date and over 20% over the past year. 

Despite this weakness, analysts remain optimistic. Based on fourteen analyst ratings, the stock holds a moderate buy rating, with a consensus price target of $55.07, suggesting a potential upside of 55%. Despite recent setbacks, this bullish outlook reflects confidence in the company's long-term prospects. It’s worth noting that the moderate buy rating placed on CZR is in line with the consensus for Consumer Discretionary Companies and above the consensus S&P 500 rating.

The recent involvement of Carl Icahn has provided some relief, pushing the stock up nearly 10% for the week. However, Caesars remains in a significant downtrend. A shift in trend and momentum will require the stock to reclaim the $38-$40 range convincingly. Further confirmation of a turnaround would be achieving and maintaining the 50-day SMA and, ultimately, the 200-day SMA near $44. The stock is currently 41% below its 52-week high, but Icahn’s engagement might be the catalyst for a potential rebound.

The Bottom Line

Carl Icahn's renewed interest in Caesars Entertainment has sparked significant attention and optimism. One example of this is the stock's average volume compared to Friday's total. On Friday, CZR traded a whopping 26.1 million shares off the back of the news, compared to its average daily volume of just 3.5 million.

While the company faces fundamental and technical challenges, the activist investor's history of strategic moves and the current bullish analyst sentiment suggest a potential for a turnaround. Investors will closely watch if Caesars can break its downtrend and capitalize on Icahn's involvement to achieve sustained growth.