“I don’t like Caesars [Entertainment] because of its high leverage – the company has $21.2 billion in net debt and $1.7 billion per year of interest obligations. To manage cost, Caesar [sic] has reduced marketing and operating costs and limited its maintenance and growth capex as well. This has in turn resulted in market share losses. To bet on Caesar [sic], one needs to be sure of a lot of things like a continued recovery in the Las Vegas Strip, macros going in the right direction, and Caesar [sic] being able to service its debt obligations. Caesar [sic] has very little margin of safety if things go south; thus, the stock appears way too risky to me.” — Motley Fool stock-picker Ashish Sharma. Less marketing, less operating budget, less maintenance and less market share? Sounds like the dreaded “death-spiral business model” to me. Say, why is that man smiling?
By David McKee ~ June 5th, 2012 @ 3:17 pm