We recently compiled a list of the 10 Best Leisure Stocks To Buy Now. In this article, we will look at where Caesars Entertainment, Inc. (NASDAQ:CZR) stands against the best leisure stocks to buy now.
In recent years, the leisure market has experienced remarkable growth. According to Market Research Intellect, the size of the global leisure market was estimated at $1.46 trillion in 2023 and is projected to expand at a compound annual growth rate of 21.8% from 2024 to 2031, when it will have grown to $8.6 trillion.
Along with growth, according to the YouGov survey, there were also notable changes in the leisure and entertainment industry in 2023 due to changing customer demands and technological breakthroughs. Even though 81% of US and 79% of UK customers recognize the value of museums, more than half of them only occasionally visit them. On the other hand, only 5% of people in the APAC and UAE skip theme parks, compared to 30% in North America.
While out-of-home entertainment expenses are on the rise, 13% of customers intend to spend more. Additionally, 36% of viewers find advertisements entertaining, and 36% of them are using virtual reality. In the United States, 10% prefer to buy movie tickets in advance, while 27% are concerned about how AI breakthroughs may affect professions, notably in information technology and accounting.
In the meantime, gambling is changing; 70% of US gamblers are open to sports betting with AI assistance, and cryptocurrency betting is becoming more popular in the US and the UK. As we have mentioned in our article, “10 Best Sports Betting Stocks to Buy Now,” generative AI is projected to dramatically impact sports betting in the next 12-18 months.
As per YouGov study, with 10% of UK consumers possessing smart devices and 24% looking at second-hand equipment, the fitness industry has also experienced growth. In general, live events such as food and drink festivals remain popular; even with safety concerns, 45% of attendees want to participate in 2024. Lastly, a shift in consumer views is evident in the rise of dynamic pricing, particularly in the US, where 54% of consumers are willing to pay more to support artists.
On the other hand, the size of the global leisure travel market was valued at $340.31 billion in 2022 and is projected to grow at a CAGR of 22.6% from USD 417.3 billion in 2023 to $2129.96 billion by 2031, as per SkyQuest.
Regionally, North America has been the market leader for leisure travel, especially the United States and Canada. However, when it comes to the global leisure travel industry, Asia-Pacific is expanding at the fastest rate. Countries in Southeast Asia, such as China and India, are major destinations for tourists in the area.
Amid the growth, a most recent Longwoods International tracking study of American travelers indicates that 39% of them plan to go abroad for leisure over the next 12 months. Furthermore, 34% of those who plan to travel abroad for leisure say they will travel abroad more this year, 50% plan to take about the same number of such trips, and only 16% say they would travel abroad less.
Amir Eylon, President and CEO of Longwoods International, stated that the expected boost in international travel by Americans is impressive, given lingering concerns about inflation and the financial health of the U.S. consumer. Moreover, he revealed that it is further evidence that American travelers see COVID-19 fading away in their rear-view mirror.
Methodology:
We sifted through holdings of leisure ETFs and online rankings to form an initial list of 20 leisure stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Caesars Entertainment, Inc. (NASDAQ:CZR)
Number of Hedge Fund Holders: 54
Revenue Growth Rate (year-over-year): 6.53%
Caesars Entertainment, Inc. (NASDAQ:CZR) operates about 50 domestic casino properties in Las Vegas (49% of 2023 EBITDAR before corporate expenses) and regional (48%) markets. In 2023, the company generated low EBITDA from its digital assets and managed properties. Following Eldorado’s 2020 acquisition of Caesars, the US presence of Caesars nearly doubled. Eldorado opened its first casino in 1973 in Reno, Nevada, and before combining with legacy Caesars, had acquired over 20 facilities. The company owns the brands Flamingo, Harrah’s, Tropicana, Bally’s, Isle, and Caesars. Additionally, the company owns the US division of William Hill, a digital sports betting platform (it sold the international division in 2022).
Given its leading omnichannel presence and Eldorado’s acquisition of the historic Caesars business (which closed in July 2020), Morningstar analysts estimate that Caesars holds a high-single-digit percentage revenue share of the $66 billion domestic commercial casino gaming industry. The acquisition increased the company’s loyalty membership from 55 million to over 60 million, nearly doubling its US portfolio to over 50 hotels. Following its merger with Eldorado, the firm realized combined revenue and cost synergies of over $1 billion, which equated to a 30% increase in pro forma 2019 EBITDAR. Prior to this most recent merger, historical Eldorado effectively combined the acquisitions of Isle and Tropicana, which it acquired in 2017 and 2018, respectively. Both transactions generated returns of almost 30%.
With the acquisition of William Hill and the rebranding of its business as Caesars Sportsbook, Caesars increased its market share significantly through aggressive advertising. CZR now provides sports betting in 32 North American jurisdictions, 26 of which allow mobile wagering, despite suffering early losses.
The company’s net revenues increased by 78% to around $1.0 billion for the whole year of 2023, while its Adjusted EBITDA improved by over $700 million.
Daniel Politzer, an analyst at Wells Fargo, raised his recommendation on Caesars Entertainment, Inc. (NASDAQ:CZR) Entertainment to Buy with a $56.00 price target, noting the company’s outstanding Q2 financial results, anticipated rise in EBITDAR, and potential asset sales. The company’s strong free cash flow and consistent growth are apparent in the positive forecast.
Baron Real Estate Fund stated the following regarding Caesars Entertainment, Inc. (NASDAQ:CZR) in its Q2 2024 investor letter:
“In the most recent quarter, we chose to lower the Fund’s large exposure to travel-related real estate companies and exited the Fund’s position in Caesars Entertainment, Inc. (NASDAQ:CZR), the largest casino-entertainment company in the U.S. and one of the world’s most diversified casino-entertainment providers.
We have near-term reservations about a possible moderation in consumer demand for some of Caesars’ properties and believe the move higher in interest rates and a largely quiet transaction market also negatively impact certain highly leveraged companies such as Caesars. We are fans of CEO Tom Reeg and may revisit Caesars for purchase at a later date.”
Parag Vora’s HG Vora Capital Management is the shareholder in the company, with 3,300,000 shares worth $131.14 million.
Overall CZR ranks 7th on our list of the best leisure stocks to buy now. While we acknowledge the potential of CZR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CZR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This post was originally published on Insider Monkey.
