The casino stock got removed from a major index.
Caesars Entertainment (NASDAQ:CZR) stock is down about 4% this week after it was announced that it will be dropped from the S&P 500 index.
S&P announced the change last Friday as part of its quarterly rebalancing. The S&P 500 is made up of the largest companies by market cap.
Caesars market cap is currently about $5.3 billion, but the stock price has plummeted some 24% year-to-date, reducing its market cap. At the end of 2024, Caesars had a market cap of around $7 billion. And at the end of 2023 it was $10 billion, so it has lost about half its value in less than two years.
Caesars has been hurt by a variety of factors, including a decline in revenue from its Las Vegas casinos, as Vegas has seen a decrease in visitors. Also, Caesars has reported net losses in the last two quarters, and its results fell short of analysts’ earnings estimates in both the first and second quarters.
Caesars is saddled with high debt, which has been a drag on earnings as it seeks to pay down its debt amid a high interest rate environment.
Caesars was among several changes in the S&P 500, effective September 22.
- Caesars (NASDAQ:CZR) – deleted
- MarketAxess Holdings (NASDAQ:MKTX) – deleted
- Enphase Energy (NASDAQ:ENPH) — deleted
- Robinhood (NASDAQ:HOOD) – added
- AppLovin (NASDAQ:APP) – added
- Emcor Group (NYSE:EME) – added
Falling into small cap territory
Caesars was added to the S&P 500 in March of 2021 when it was trading at $88 per share. Later that year in 2021 the stock price skyrocketed to about $120 per share.
It is currently trading at around $26 per share, which means the stock price has dropped about 70% since then. Since September 10, 2021, when it was trading at around $104 per share, Caesars stock has had an average annualized return of -26% and experienced a total decline of 76%.
With its fall, it has plummeted all the way down to small cap territory, as it was added to the S&P SmallCap 600 index, effective September 22, along with Enphase and MarketAxess, among others.
Being bounced from the S&P 500 is significant, as it means that Caesars stock will no longer be included in the large mutual funds and ETFs that track the S&P 500. Thus, it loses some major investments.
Being added to the SmallCap 600 means it will be added the funds that track that index, but the amount of assets in small cap ETFs pales in comparison to the assets in S&P 500 funds.
Raymond James lowered its price target for Caesars by $6 to $43 per share but still recommends a buy citing the firm’s efforts to reduce debt. Caesars had median price target of $43 per share and a buy rating among the 20 analysts that cover it. That suggests 65% upside.
