Caesars Entertainment Corp (NASDAQ:CZR)

CAPS Rating: 1 out of 5

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Member Avatar pchop12316 (34.98) Submitted: 6/8/2015 10:53:12 AM : Underperform Start Price: $6.36 CZR Score: +1.14

in trouble

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Member Avatar superstar (99.76) Submitted: 6/3/2015 12:58:31 PM : Underperform Start Price: $8.13 CZR Score: +21.12

If an investor was to ask me what I thought the single best company to short in the entire market was (a lot of good options out there) I'd probably have to answer: Caesars Entertainment Corp, with the caveat I'm excluding a lot of small caps like RCPI. Since Jed analyzed the financials, nothing has really changed, it owes an unbelievable 21 Billion plus in debt, and the interest expense is comical. On top that it faces endless litigation expenses, in fact CZR is back in bankruptcy court this week, this time for a trial over whether the chapter 11 case of its largest operating subsidiary, Caesars Entertainment Operating Co., should halt lawsuits against its non-bankrupt parent, Caesars Entertainment Corp.

As Jed has already reviewed the financials I thought I'd touch on some personal observations of why I think the macro factors hitting the U.S. casino business spell gloom and doom as well -- as if CZR needed more good news. For decades the U.S. casino business was build on the premise that you bring people in with nice accommodation and a cheap price, delicious food and a cheap price, drinks those would be free, shows that would require expensive tickets in any other city would very reasonably priced, and of course service that would make anyone feel like rock star came almost free. How did casinos stay profitable by providing guests with exceptional rooms, great food, free drinks, entertaining shows, and stellar service, at such a huge discount? Pretty obvious-- guests would blow a ton of money on the casino floor playing slot machines and table games which kept casinos profitable. This was a profitable business for decades for the U.S. casinos, and older Americans have always loved those slot machines in particular. Anyone remember the 1996 movie Swingers, when Jon Favreau and Vince Vaughn drive from Hollywood to Vegas to party and walk in the casino and literally packed with 80 year old ladies playing slot machines. LOL.

Well, I hate to say it but things have changed. I'm personally what the casinos call their worst nightmare guest, and I'd venture to say a large majority of Americans under 45 are the same way. Last summer I took my girlfriend to Vegas and we stayed at a 5 star hotel, in which I lined up a suite online for $280 a night that would have cost a least $1500+ in many cities, including Macao. We spent plenty time sitting by the pool and having free drinks, we went to dinner at a very nice buffet and I paid $20 dollars per plate and I ate nothing but fresh lobster tale until the staff cut me off, which would have cost at least $100+ in most other U.S. cities. I then went to one of those crazy dance places in the casino which is supposedly how the casinos are attempting to generate revenue with the younger generation, but they let us in for free, and I guess they were expecting us to buy drinks, but since we already had brought some fine Russian vodka with us, we didn't spend any money on drinks. The next day was more relaxing by the pool with free drinks, and an employee offered us free tickets to a magic show, which was pretty cool, a perk I think of staying in the suite, so that was fun. I forgot to mention we didn't do any gambling. Overall we had a great time, and I recommend a Vegas trip anyone for a few days of R&R, but I'm not sure the casino enjoyed our visit. I actually think they lost a good chunk of change on our visit. As demographics continue change in the U.S., I do believe the endless revenue that the casino companies have relied upon from those slot machines will slow as younger Americans just don't seem that interested in them.

On a side note, you actually still have serious competition in the casino industry and several casinos are actually going up currently in Vegas, Indian reservations continue to build casinos across America, and there is always the possibly that online gambling will only increase as well which doesn't bode well for a company like CZR. Anyway, just my two cents on investing in CZR.

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Member Avatar elvisbeatlesfan (32.76) Submitted: 6/1/2015 12:59:30 PM : Outperform Start Price: $7.33 CZR Score: -13.52

Risky play going along with CEO insider purchase of 100K shares

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Member Avatar joaquingrech (98.89) Submitted: 4/20/2015 2:51:06 PM : Underperform Start Price: $9.43 CZR Score: +32.18

going bankrupt

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Member Avatar lucdewailly (91.31) Submitted: 3/26/2015 9:46:40 PM : Underperform Start Price: $9.41 CZR Score: +34.60

Unsurmontable Debt

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Member Avatar BUbulldog (71.74) Submitted: 3/7/2015 10:02:32 AM : Underperform Start Price: $9.63 CZR Score: +35.10

Nearly bankrupt.

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Member Avatar ruinas (49.21) Submitted: 12/27/2014 3:50:20 PM : Underperform Start Price: $15.47 CZR Score: +59.30

Markets overbought - correction due

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Member Avatar JCLscapXperiment (72.30) Submitted: 12/14/2014 6:58:30 PM : Underperform Start Price: $12.86 CZR Score: +54.20

Jan 17 Put $1.60, $5

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Member Avatar rbitrage (79.43) Submitted: 12/10/2014 6:04:32 PM : Underperform Start Price: $14.67 CZR Score: +59.22

No profit. Negative equity. General market going downward.

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Member Avatar maxxx2004 (51.21) Submitted: 8/8/2014 12:36:53 PM : Underperform Start Price: $13.12 CZR Score: +60.62

Other States are eased their gambling laws recent years. Atlantic City is losing his Gambling Glory.and this sinking Ship will take with him Caesars too...

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Member Avatar pchop123 (80.79) Submitted: 8/6/2014 1:36:58 PM : Underperform Start Price: $13.79 CZR Score: +62.58

troubles in the Roman Empire

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Member Avatar jed71 (97.91) Submitted: 8/4/2014 1:51:06 PM : Underperform Start Price: $14.20 CZR Score: +63.42

How much debt does it take to generate $592MM in interest expenses in a single quarter? Answer : About $21.2 BILLION. That's right - more than $21 BILLION IN OUTSTANDING DEBT. For those following from home, if you subtract out intangible assets of $3.5BB, the total remaining TANGIBLE assets is slightly less than their outstanding debt burden. Someone else already pointed this out on a pitch from 2013 but it bears repeating : their quarterly interest payments represent just north of 28% of their total revenue production each quarter. So what are you really buying when you purchase this stock? It seems to me the creditors already OWN this company....

This stock is very scary and I don't get why anyone would buy into this. An enormous ($22.93) per share LOSS in 2013 and no signs of the losses slowing. Multiplying that loss by the 144MM shares outstanding and thats gives you a total loss of $2.9 BILLION in a single year. This might not be the reverse merger madness that I normally pitch, but the debt load and subsequent interest expenses here are just as crazy.

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Member Avatar dynamocap (< 20) Submitted: 8/1/2014 11:23:00 AM : Underperform Start Price: $15.80 CZR Score: +68.26

equity is completely worthless

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Member Avatar OneStepCloser (67.35) Submitted: 9/11/2013 10:43:25 PM : Underperform Start Price: $25.39 CZR Score: +97.89

Super bad fundamentals

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Member Avatar falu17 (20.08) Submitted: 8/9/2013 4:21:32 PM : Underperform Start Price: $18.70 CZR Score: +89.75

At some point, reality must set in... With long-term debt representing 77% of their balance sheet total, interest expenses of 25% (!) of their revenue, negative equity position due to continued losses, dropping casino revenues, I cannot understand their current share price and performance in 2013.

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Member Avatar marketsailor1945 (72.61) Submitted: 5/9/2013 1:59:36 PM : Underperform Start Price: $15.33 CZR Score: +86.11

Who let this thing go public? They have some great financiers, but unless their online business becomes the greatest thing of the 21st century I can't see them staying in business for too long.

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Member Avatar SaiyanBroker (63.72) Submitted: 3/13/2013 4:01:48 PM : Underperform Start Price: $15.78 CZR Score: +93.38

Thanks to my first account, I was able to identify Ceasar's Entertainment back in November as a good investment twice and made some decent money. What a pain to call it wrong on my CAPS, though. :P At the time, every fool was screaming that CZR was a bad investment, so I jumped on and said the same. Plus, analysts for the stock had consistently over-projected the earnings each quarter of last year. The pick seemed legit. Why then did I decide to jump on this stock with real money at the same time? It started with simple trend following that later became a good reason.

Well, here I go again (http://www.youtube.com/watch?v=i3MXiTeH_Pg )-- betting the downwards direction. I'm very skeptical about either direction, but I honestly have to say that I don't value this stock at this price. I sold all of my shares yesterday. (f -_- )f

Price/Book : 53.80 (<-- that is an absolutely ridiculous value by the way)
Price/Sales: 0.21

The POSITIVE:
What makes me believe more growth is still possible? For one, this is a gambling play; I've only been to a casino once in my life, so my knowledge of consumer mentality here is limited to my imagination. I find it hard to believe that so many investors would just jump up the band wagon here without insider knowledge. Although, admittedly I did just that. 8) Checking, as I'm sure AngsarJohn would say is the best website in the world, gurufocus, there is no mention of insider buying. The only possibility there is potentially illegal insider knowledge which, from a conspiracy theorist POV, is possible since crime and gambling follow hand in hand. The second reason is because of the relatively low P/S listed above. Considering that value, this is still a great investment opportunity. The price is understating the amount of sales. It could also be that by the end of Q1 (in 05/01), the book value of the company could increase to more accurately reflect where the company is at. My third reason is the strong upwards trend.

http://www.gurufocus.com/gurutrades/CZR

However, as many an experienced investor knows, when the elasticity of a growth curve becomes too great, a dramatic pullback is inevitable. I for one, see this happening soon- especially if the meteorologists are correct and we see a dry spell come from the FED soon.

The NEGATIVE:
So why am I red-thumbing this? On top of a ridiculous P/BV, the company has taken on $21.41 billion in debt and has $28.33 billion in liabilities totaling $49.74 billion. On a percent basis, the company has an averaged 5 years sales growth of (%3.91) and an averaged 5 years gross income growth of (%20.6). Basically, the 5 year trend for revenue has been in decline. EBITDA itself has also averaged an annual growth of (%9.79). Heck, even net operating cash flow has decreased YOY. I calculate it to average a gain of about (%36.4). That's a lot of risk for the investor! So, why has this stock been growing? Where has all of this money gone?

You can check me on my calculations if you'd like.
http://quotes.wsj.com/CZR/financials/annual/income-statement

The answer to that question is found in the assets of the company which have from 2011-2012 jumped from $1.837 billion to $3.949 billion most notably from a short term investment of $1.686 billion. Sadly, I didn't recognize this in 11/15 of last year and have paid for it with -236 points in MrOneHundred. *Face Palm* On the flip side, after I recognized the growing trend, I jumped on the band wagon with a few shares which later became more once I identified this sudden increase in assets. (An indication that this gambling empire is gaining a competitive edge.) The only article of significance to come out around that date was the one listed below this paragraph.

http://www.reuters.com/finance/stocks/CZR.O/key-developments/article/2641772

At this point, I simply can't value a company that has historically lost money, is projected to lose more money, and is consistently lower than analysts expectations- at least not at this price. It's too risky.

I could very well be proven wrong a second time on this stock and lose tons more points. Who will know if I'm right or wrong? Only Time... http://www.youtube.com/watch?v=7wfYIMyS_dI

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Member Avatar sandyrouth1 (< 20) Submitted: 2/27/2013 8:21:56 PM : Outperform Start Price: $12.12 CZR Score: -85.08

new jersey should be a bonanza for them

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Member Avatar ava5147 (< 20) Submitted: 2/27/2013 2:45:12 PM : Underperform Start Price: $12.34 CZR Score: +85.91

overvalued. p/b ratio

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Member Avatar TulipSpeculator1 (89.73) Submitted: 8/15/2012 3:58:39 AM : Underperform Start Price: $8.00 CZR Score: +69.54

With their huge debt load small earnings the numbers just don't add up

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