Is Caesars Entertainment (CZR) a Smart Bet Despite High Short Interest?

The gaming and hospitality sector has long been a battleground for investors and short sellers alike, but Caesars Entertainment (NASDAQ:CZR) is drawing attention for its unique blend of operational momentum and lingering skepticism. With a short interest of 11.59% of its float as of April 2025, CZR sits in a sweet spot of investor ambivalence—moderately shorted but not yet a “crowded” short. Is this a sign of opportunity for long investors, or a red flag? Let’s dissect the data.

The Short Interest Landscape: A Mixed Signal

Short interest at 11.59% of the float places CZR in the upper end of moderate short interest, typically defined as 10-15%. While this is down from December 2024 levels, it remains a notable figure. The short interest ratio (days to cover) of 4.0 suggests that short sellers could theoretically cover their positions in roughly four trading days—a manageable timeframe that reduces the risk of a violent short squeeze. However, the persistent presence of 11.59% short interest signals lingering doubts about the company’s ability to sustain its growth trajectory.

A Company in Transition: Strengths and Uncertainties

Caesars’ Q4 2024 results underscore its digital pivot. Digital revenue surged to $303 million in the quarter, contributing to an annual $1.2 billion in digital revenue—a milestone that reflects the success of its sports betting and online gaming platforms. The company’s expansion of live dealer studios and strategic partnerships, such as its deal with DraftKings, aim to capitalize on the growing demand for immersive gambling experiences. These moves are critical as the sector faces regulatory scrutiny and market saturation.

Yet, volatility persists. Sports betting revenue, a key growth driver, dipped in Q4 due to reduced betting activity on “down” sports seasons and macroeconomic pressures. This inconsistency highlights a core risk: CZR’s future hinges on stabilizing its digital operations while navigating a highly competitive landscape.

Institutional Support Amid Skepticism

Despite the short interest, institutional investors remain committed. As of Q4 2024, 79 hedge funds held stakes in CZR, with some notable funds increasing their positions. This suggests that long-term value seekers see potential in Caesars’ scale, brand power, and ability to execute on its digital roadmap. The company’s $24.5 billion market cap, however, compresses its valuation—trading at 13.2x forward EBITDA as of April 2025—making it relatively affordable compared to peers like Wynn Resorts (WYNN) or MGM Resorts (MGM).

The Case for Buying Now: Risks vs. Rewards

Buying into a stock with elevated short interest isn’t without peril, but CZR’s fundamentals tilt the equation in favor of cautious optimism. Key positives include:
1. Digital Dominance: Its All-In-One app and sports betting platform have 6.3 million monthly active users, a metric that could grow as it expands its live dealer operations.
2. Balance Sheet Resilience: CZR’s leverage ratio improved to 4.5x EBITDA in Q4 2024, down from 5.2x a year earlier, signaling better financial health.
3. Share Buybacks: The company repurchased $1.2 billion of its shares in 2024, a move that boosts per-share metrics and signals confidence.

The risks, however, are material. A prolonged slowdown in sports betting or regulatory headwinds (e.g., stricter advertising rules) could pressure margins. Additionally, the days-to-cover ratio, while low, could rise if short sellers increase their bets.

Conclusion: A Calculated Gamble

Caesars Entertainment is not a “high short interest” stock in the traditional sense—its 11.59% float short ratio is moderate—but it offers a compelling risk-reward profile. The company’s digital transformation and institutional support suggest that the underlying business is moving in the right direction. While short sellers may doubt CZR’s ability to sustain growth, the data points to a resilient operator with a solid playbook.

For investors, the key is to pair the stock’s valuation (undemanding by sector standards) with its execution on digital initiatives. If Caesars can stabilize its sports betting revenue and continue deleveraging, the stock could outperform. The short interest, while a headwind, also represents a potential catalyst: if skepticism fades, a reversal in short positions could amplify gains.

In short, CZR isn’t a “best” high short interest stock in a vacuum, but for those willing to bet on its turnaround, it’s a contender worth watching.