Caesars Could Consider Share Buybacks, Not Looking at Near-Term M&A

Key Takeaways:

• Caesars Entertainment (NASDAQ: CZR) hints at potential share buybacks if stock remains low and is currently not pursuing mergers and acquisitions.
• CEO Tom Reeg outlines plans for debt reduction and capitalizes on new revenue sources, including a recent casino opening and a rebranding effort.
• Despite a lukewarm response to the first Las Vegas Grand Prix for Caesars, expectations for future events and the Super Bowl are high.
• Caesars sees promising growth in its online unit, with significant revenue increases post-rebranding, and plans to launch a second online brand.

In a landscape where the buzz of mergers and acquisitions (M&A) often dictates the next big move for giants in any industry, Caesars Entertainment (NASDAQ: CZR) throws a curveball. The casino behemoth, finding itself in a period of reflection amidst a stock market performance that could be kindly described as 'less than stellar', is entertaining the thought of share repurchases. This strategy, though not groundbreaking, signals a moment of introspection for a company known for its aggressive expansion and branding efforts.

During the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, Caesars CEO Tom Reeg shared insights that could be music to the ears of existing shareholders. Amid a candid chat with J.P. Morgan analyst Joseph Greff, Reeg conveyed a clear message: the current focus is inward. With Caesars stock taking a 16.2% dip year-to-date, the last thing on the company's agenda is diluting shares through new issuances for the sake of acquisitions. Instead, the path forward involves leveraging free cash flow from traditional revenues and strategic additions like the new casino in Danville, Virginia, and the rebranding of Harrah’s New Orleans to Caesars Palace, to chip away at a hefty $12.4 billion debt load.

Second Las Vegas Grand Prix Could Be Better for Caesars

The inaugural Las Vegas Grand Prix, though a spectacle, didn't quite deliver the expected windfall for Caesars. Catering to the high rollers meant that the real winners were the top-tier Strip venues, leaving other Caesars properties watching from the sidelines. However, Reeg is not one to dwell on missed opportunities. With a market-wide effort to make the event more appealing to the mass market, the next Grand Prix could see Caesars in a more enviable position.

Caesars Online Outlook Bright

On the digital front, Caesars is not just keeping pace but setting the bar. The 2023 rebranding of its online casino to the revered Caesars Palace name has been nothing short of a jackpot. Each month post-rebranding has seen gross gaming revenue (GGR) exceed expectations, with a staggering 50% year-over-year growth and a $40 million revenue in February alone.

Looking ahead, Reeg unveiled plans for the launch of a second online brand aimed at boosting customer acquisition and engagement within the Caesars online ecosystem. While he remained tight-lipped about new states joining the iGaming scene, the implication was clear: the potential for growth is significant.

In a world where adaptability is key, Caesars Entertainment is proving that introspection and strategic shifts can be as powerful as any acquisition. By focusing on debt reduction, enhancing existing offerings, and doubling down on digital expansion, Caesars is not just playing the game—it's aiming to redefine it.