Caesars Entertainment (NASDAQ: CZR) shares have seen an increase of 8.68% year to date and a 13.14% rise over the past year. CEO Tom Reeg, however, sees more value in the casino company he leads.
A recent Form 4 filing with the Securities and Exchange Commission (SEC) reveals that Reeg purchased an additional 7,500 shares of Caesars stock earlier this month. The transaction, which took place on June 14, was at an average price of $49.93, amounting to a total transaction price of $370,725. The stock closed at $45.21 on Friday after a 10% slump over the week.
The purchase was made through a trust that now owns 17,500 shares of the Flamingo operator. In addition to this, Reeg holds another 318,720 shares of his employer’s equity in a personal investing account.
Reeg assumed the role of CEO of the largest domestic casino operator by the number of properties in July 2020. This was when Eldorado Resorts, the company he previously led, acquired the Harrah’s operator, birthing the “new Caesars.”
Caesars Under Reeg’s Leadership
Reeg took over the reins at Caesars during a challenging time. The coronavirus pandemic had not only hampered the gaming industry but also cast doubt on whether the Eldorado and Caesars merger would materialize.
Since the deal was finalized and Reeg took charge of the new company, Caesars’ stock has risen by approximately 36%. It has become a favorite among Wall Street analysts, especially at a time when the operator’s Las Vegas Strip and regional casinos are performing exceptionally well.
Stifel analyst Steven Wieczynski, in a note on Caesars earlier this month, stated that the company is not seeing any significant signs of weakening in their customer base. He believes that the current trading levels have already incorporated a significant slowdown in consumer trends. Wieczynski rates the stock a “buy” with a $68 price target, implying an upside of 51.9% from the June 23 close.
Reeg’s Strategy for Caesars
One of the reasons Wall Street is enthusiastic about Reeg and the Caesars management team is their efforts towards debt reduction and Caesars Digital’s potential profitability, which could be realized later this year. This unit includes internet casinos and Caesars Sportsbook.
At the end of the first quarter, the gaming company had $13.2 billion in debt. Although this is one of the highest totals in the industry, it is significantly lower than the amount when Eldorado acquired the company, and it represents a substantial year-over-year improvement. Remarkably, Caesars achieved its debt reduction in 2022 without the benefit of an asset sale. Analysts and the company itself believe that another $1 billion-plus in liabilities can be eliminated this year, also without the need to sell a gaming venue.
By 2025, it’s possible that Caesars will have reduced its leverage to the 3x range while generating $5 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA). As Wieczynski notes, this could imply a per-share free cash flow of $12.