Will Caesars Entertainment Ever Stop Falling?

Shares of Caesars Entertainment (Nasdaq: CZR  ) hit a 52-week low yesterday. Let's look at how it got here and whether clouds are ahead.

How it got here
What a disaster Caesars Entertainment has been as a public company. After its high-flying February IPO, the stock has declined steadily. But don't say we didn't warn you this was coming. The day of the IPO, I warned of dark clouds coming because the company's debt was an anchor the company just wouldn't be able to shed.

When the company reported second-quarter earnings, the problems for Caesars became crystal-clear. Revenue and EBITDA fell in all but one of the company's operating regions, and the company added more debt to the balance sheet.

Since the IPO, gaming stocks haven't done well, but Caesars has lagged behind the competition. Wynn Resorts (Nasdaq: WYNN  ) and Las Vegas Sands (NYSE: LVS  ) , which are more focused in Asia than the U.S., have led the way, but MGM Resorts (NYSE: MGM  ) has had similar problems to Caesars.

CZR Total Return Price Chart

CZR Total Return Price data by YCharts

The fundamentals show exactly why Wynn and Sands are outperforming rivals. They will both post a profit this year while Caesars and MGM are expected to post significant losses.

 

Net Debt

Quarterly Revenue Growth

2012 EPS Estimate

Dividend Yield

Caesars Entertainment $19.0 billion 0.2% ($5.51) N/A
MGM Resorts $11.9 billion 30.1% ($0.51) N/A
Las Vegas Sands $5.8 billion 10.1% $2.36 1.2%
Wynn Resorts $3.3 billion (8.3%) $5.43 1.9%

Source: Yahoo! Finance.

Caesars is expected to lose nearly its entire market cap this year, and I'm not sure how long the losses can pile up.

What's next?
Bankruptcy isn't around the corner because management has pushed out debt maturities, but I see no reason the company will be in better shape in a year. The company's markets are floundering, and there is absolutely no way the company can easily maintain its debt load without significant growth.

I'm not the only one who's bearish on the stock. Fifty CAPS members have given the stock a thumbs-down versus just 13 outperform calls, resulting in our lowest one-star rating. There's just not much positive to point to for Caesars, and I would walk away.

Interested in reading more about Caesars Entertainment? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium manages an account that owns shares of Wynn Resorts. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (8) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On August 30, 2012, at 3:32 PM, cp757 wrote:

    Will Caesars Entertainment Ever Stop ?

    Will Caesars Entertainment Ever sell assets to reduce debt ? Will Caesars Entertainment Ever Stop borrowing money ? Will Caesars Entertainment Ever Stop losing money ? Will Caesars Entertainment Ever Stop finding suckers to buy more shares ? Will Caesars Entertainment Ever Stop issuing more shares ? Will Caesars Entertainment Ever Stop selling insider shares ? So many questions.

  • Report this Comment On August 30, 2012, at 4:21 PM, bornlazy wrote:

    Will sun ever rise from the west ? Will US government ever reduce its debt ? Will Obama ever stop blaming someone else ? The answer is clear.

  • Report this Comment On August 30, 2012, at 6:17 PM, cp757 wrote:

    Will Obama Ever Stop raising debt ? Will Obama Ever Stop trying to get suckers to vote for him ? Will Obama Ever Stop government spending ?Will Obama Ever keep his promise on Abu Ghraib? Will Obama Ever Forbid companies in bankruptcy from giving executives bonuses ? Will Obama Ever Allow Medicare to negotiate for cheaper drug prices ? This can go on all day. What were we talking about?

  • Report this Comment On August 31, 2012, at 1:11 AM, MorganMan wrote:

    I buy about $5,000 worth of CZR stock about every month. We know all the negatives...

    I disagree with many of your comparisons of the gaming "sector." They all operate in many different markets. CZR is not comparable to any other company. It's such a large scale in Vegas and the regional space to have a direct comparable competitor.

    It would be nice to know what you mean by CZR losing it's entire market cap without going bankrupt... CZR just unloaded a property in St. Louis for $600 mil... There is no value to be found here? Is that what our saying?

    No debt comes due until 2015. Which will be enough time for the economy to heal and IP to start up which will make breathing room for a refi.

    Nothing in your article mentions a robust economic recovery or internet poker. Didn't Warren Buffett once say to focus on the Assets because the Liabilities are solid? Why are you JUST writing about the liabilities here?

    - a banker

  • Report this Comment On August 31, 2012, at 11:55 AM, Wuffy wrote:

    Here's a better investment for today. Buy tickets to Celine and a couple of drinks. That way you'll see a nice show while at Caesars. A buy at a five dollar poker chip.

  • Report this Comment On August 31, 2012, at 1:30 PM, cp757 wrote:

    Travis said "What a disaster Caesars" he is right on the money. Don't say he didn't warn you .The company just added more debt to the balance sheet and MorganMan offers a defense of a sale of one of Caesars properties for 600 million.

    Loveman the CEO lists Goodwill at 3.465 billion on a company that has 20.3 billion in Debt with depreciating property values. LVS and WYNN list goodwill at zero and Caesars should be less than them so CZR is 4 billion off on that one. Loveman takes 7 million in salary and will add shares as soon as he can.The only thing that keeps him from going to 25 billion in debt is the high interest rates the banks charge him.

    My question for MorganMan is what earth shaking event will move this stock. If you tell me its Internet Gambling then you really have bought into Lovemans lies. You will turn blue waiting for that hope and a prayer.

    Travis has warned everyone about this company and we still get people buying the stock on the hope it will go up. I consider the stock to be a joke and a con job perpetrated by Loveman but what do I know. Good luck to all that invest in the sector.JMHO

  • Report this Comment On September 02, 2012, at 7:57 PM, MorganMan wrote:

    cp757,

    There is nothing humble about your post or comments. Also, you are not talking to some "fool" here who is "hoping" CZR goes up.

    Without writing a book I said that CZR has serious value at $900 million in Market Cap when they can unload a property for $600 million.

    Goodwill is sometimes used by companies who have been purchased by other companies. LVS and Wynn are parent companies. CZR is not. I'm not using Goodwill here for any valuation. I don't pretend to know executives intentions. A bigger float might make for a more stable stock price.

    Since you have already shown your negative mood towards me and my opinions maybe you will listen to somebody else in order for me to answer your question.

    John Paulson believes that there is about $1.5 billion in EBITDA that CZR can produce in a couple of years. I think John is a bit light on that but that's another story. Like MGM, CZR will reduce Int Expense as the finance performance of the company improves and eventually profits will come through. Furthermore, casting aside Internet Poker like you have shows your lack of understanding of what is actually going on in the industry. Are you aware that South Point will be operating an internet poker site in October in the state of Nevada? This will grow to other states and then more will join etc...

    Also, your statement on depreciating property values echoes Travis' flawed perspective that the U.S. economy will never recover and, that we are stuck in this environment forever.

    My statement and one that is shared by John Paulson that nobody picked up on is that CZR will work in a "robust recovery." One that we have yet to witness. As Internet Poker get's going in Nevada and spreads to other states CZR is projected to add atleast $400 million in EBITDA based on it's ability to leverage it's brands WSOP etc. Assets would be hard to keep under $20 billion at that point. Do I even need to mention that debt doesn't come due until 2015? That is three years for the economy to move forwards and CZR to refi all of that. Why aren't you making this bet is a better question with all that being said.

    Travis is warning people? I wonder how John Paulson would feel about being told he was warned after he made a bet on CZR worth hundreds of million of dollars. Food for thought...

  • Report this Comment On September 04, 2012, at 11:33 AM, Senescent wrote:

    Morganman what have you been smoking? It's fine to average down your stock price when you are buying a company that will recover. That's not the case for CZR as it spirals to a round of bankruptcy. What is it about CZR that you love? Is it the golf course in Macao? Is it the ferris wheel that they plan to build next to the Imperial Toilet? Is it the overpaid and overweight Loveman (did he tell you he was a genius?)? Sure there'll be some recovery someday in Vegas. And maybe there's some growth to come from internet poker. All of this will come too late to save CZR from bankruptcy.

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