A Fresh Look at Caesars Entertainment (CZR) Valuation as S&P 500 Exit Triggers Forced Index Selling

 

​Caesars Entertainment (CZR) just made headlines after S&P Dow Jones Indices revealed it will be removed from the S&P 500 and reassigned to the S&P SmallCap 600 Index. This shift is due to market capitalization dipping below the S&P 500’s minimum threshold, and for investors, this means more than just a new index label. Tracker funds and ETFs tied to the S&P 500 will have to sell their Caesars shares as a result, a mechanical move that adds to the downward push on the stock as the change approaches on September 22.
Looking at the broader context, this event comes at a time when Caesars’ momentum has been under pressure. Shares have fallen nearly 30% over the past year, continuing a longer-term slide, and are down more than 21% this year alone. At the same time, the company continues to announce strategic initiatives, such as securing new beverage partnerships nationwide, but those fundamental moves have so far not reversed the trend.
After a difficult trading year and now a forced sell-off from index funds, questions arise about whether Caesars is a bargain being overlooked by the market or if the current price accurately reflects its future prospects.

Most Popular Narrative: 37.5% Undervalued

Based on the most widely followed narrative, Caesars Entertainment is currently viewed as substantially undervalued compared to its calculated fair value, reflecting a significant discount by the market.

Strategic capital allocation into property renovations, new amenity rollouts (such as room remodels and high-return upgrades like Flamingo’s pool experience), and slot machine enhancements are already showing positive returns and are expected to unlock additional property-level revenue and margin expansion over coming years.

How does a stock win analyst confidence despite market setbacks? This narrative’s secret sauce is a powerful mix of recurring digital revenue and bold property investments that could transform cash flow and profits. What ambitious financial milestones must Caesars reach for its share price to return to double digits? Dive in to uncover the surprising assumptions—according to analysts, this playbook might just raise your expectations.

Result: Fair Value of $41 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, persistent debt levels and shifting consumer preferences could challenge Caesars’ turnaround story if costly renovations or evolving demands reduce future earnings growth.

Find out about the key risks to this Caesars Entertainment narrative.

Another View: The SWS DCF Model Perspective

Taking a different approach, the SWS DCF model also suggests that Caesars Entertainment is undervalued. This echoes the conclusion reached by market multiples. However, could both methods be missing something beneath the surface?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Caesars Entertainment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own Caesars Entertainment Narrative

Not convinced by these takes or want to dig deeper on your own terms? You can craft your own story about Caesars in just minutes: Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Caesars Entertainment.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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