Posted on: March 4, 2024, 03:04h.
Last updated on: March 4, 2024, 03:42h.
Shares of Caesars Entertainment (NASDAQ: CZR) are down 19.6% over the past year, which is disappointing when considering the S&P 500 is higher by 29.2% over the same stretch.
However, executives at the gaming company have used the weakness in their employer’s stock to accumulate more shares. That could be an encouraging sign because, as noted in a recent report by the Citi equity research team, insider buying and selling to start 2024 is below the levels seen last year.
As a percentage of the operator’s market capitalization, Caesars’ insiders bought 0.007% of the gaming company’s shares over the past six months. That placed that casino giant among the top 20 stocks based on that metric.
Interestingly, both (buying and selling) have had some relationship to index level forward performance historically,” Citi Strategist Scott Chronert wrote in a note. Over “the last ten years there was a decent +0.51 correlation between the number of insider buyers and 12-month forward returns.”
Insider buying can be a relevant indicator because those buyers are engaging in those purchases for a single reason: they believe their employer’s shares will appreciate in value.
Gaming Insiders Restrained When it Comes to Selling
Using the percentage of market value purchased metric, Caesars was the only gaming company to appear in the top 20, ranking 15th on the Citi list.
Perhaps encouragingly — or surprisingly — no gaming operators were among the top 20 companies in terms of insider selling over the past six months. That could be a modest shocker to some market observers when acknowledging that insider selling of at least one highly visible gaming corporation was elevated.
That could prove pertinent because not only does lack of insider selling potentially signal management confidence in a stock, but also because there are slight correlations between insider selling and downside on the shares in question.
“As for the number of insider sellers, there is some evidence that their timing is good but the correlation is weaker at -0.17,” Chronert added. “Taken together, with more weight on the insider buying measure, there is a mixed signal that generally implies lower but positive forward return expectations.”
Why Caesars Insiders May Be Validated
Indicating that ordinary investors might want to take clues from the executives buying Caesars stock, those purchases may prove prescient. Some analysts believe the stock has been punished too harshly, particularly as gross gaming revenue (GGR) in Nevada consistently flirts with or breaks records.
Of the 16 sell-side analysts covering the gaming stock, 12 rate it the equivalent of “strong buy” or “buy” and the consensus price target of $60.13 implies upside of 44.4% from current levels.
Additionally, the Flamingo operator is slashing debt, which could bolster free cash flow in turn supporting the thesis for the stock.
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