Analysts at Bank of America downgraded a pair of casino stocks, citing a slowdown in consumer spending, among other reasons.
Analyst Shaun Kelley downgraded
(ticker: CZR) and
(PENN) to Neutral from Buy on Wednesday, citing concerns about consumer spending and whether people will spend as much on gaming during a recession. Kelley lowered Caesars’ price target to $55 from $60 and PENN’s to $40 from $45.
Caesars shares declined 4.8% to $50.04 Wednesday. PENN shares dropped 4.2% to $33.57.
The analysts said they see risks for the gaming sector from inflation and the possibility of heightening unemployment during a recession. The analysts called casino gaming stocks “the largest ‘over-earners’ vs. pre-COVID” in their coverage.
“We are taking a more defensive stance until the macro-outlook or valuations become more compelling,” the analysts added.
PENN declined to comment. Caesar couldn’t immediately be reached for comment.
Shares of Caesars have sunk more than 45% so far this year. In November, the casino operator beat on third-quarter earnings, thanks in part to a better digital segment performance. Caesars posted a $38 million loss for third-quarter digital same-store adjusted Ebitda, while analysts had anticipated $93.6 million.
BofA analysts said the company “hit a home run with its initial Barstool stake” but “Barstool’s momentum has returned to earth.”
“PENN is still working to grow its in-house digital capabilities and (re)-establish itself in the top tier of the landscape,” analysts added.
Write to Emily Dattilo at email@example.com