Add Caesars to the growing list of sports betting companies that still had successful quarters despite a strong run by favorites in March Madness.
Sports betting operators have focused on how to raise their structural hold to avoid poor quarters based on customer-friendly results. Caesars succeeded in the first quarter with an increased parlay mix that rose 2.6 percentage points compared to last year.
“Our sports betting customers are responding favorably to our continual product enhancements, particularly within the parlay and cash-out categories,” said Eric Hession, president of Caesars Digital.
Despite overall EBITDA growth of 4.1% and Caesars limiting the impact of Las Vegas hosting the Super Bowl last year, CZR was up just 0.57% when the market opened Wednesday.
Online casino booming in April
Online casino is off to a hot start for the second quarter, with revenue up “almost 70%” through the first 27 days of April, CEO Tom Reeg said.
The business is a “stellar performer,” he added, as online casino continues to grow strongly despite tough comparisons. Net gaming revenue grew 53% in the first quarter after it grew more than 50% in the first quarter last year, and the second quarter is on pace to outdo the 50% growth seen in the second quarter of last year as well.
Hession noted volume was up 28% for online casino. Caesars Palace Online, the first of the company’s two standalone online casino apps to launch, is Caesars’ “highest net revenue-generating app” with the fastest growth.
The second standalone app, Horseshoe, contributed 7% of digital’s net gaming revenue for the quarter.
Sports still heavy EBITDA lifter
Reeg expects sports betting to “generate hundreds of millions of EBITDA for us in the next 18 months.” Sports betting is still growing at high single digits to low double digits depending on customer segment and state, Hession added.
Online casino is behind sports in terms of EBITDA, but Reeg thinks states looking for tax dollars will start turning toward iGaming soon.
As for prediction markets like those offered by Kalshi, Reeg said there has been no impact so far and left the door open for Caesars to get involved.
“If there are ways to drive more EBITDA through our business that open up through legislation or regulation, you should assume that we’re going to look to how we can take advantage of those opportunities to the greatest extent possible for our shareholders.”
Analysts cautiously optimistic on Caesars
Analysts are scaling back some forecasts but still see Caesars as a stock to buy.
Steve Wieczynski of Stifel lowered his target to $42 from $51 but maintained his buy rating. The change comes as he expects a “dramatic slowdown in consumer spending/travel starting in [second-half 2025]-2027.”
Barry Jonas of Truist maintained his $40 target and buy rating. He noted management is not seeing any slowdown in consumer trends yet while citing multiple positives including an undemanding valuation, land-based gaming stability, and growth in both the digital segment and free cash flow.
Carlo Santarelli of Deutsche Bank lowered his target to $51 from $54 but maintained his buy rating and noted the quarter “resonates favorably” on the company’s outlook.
First quarter digital results
Caesars’ online casino and sports betting segment reported $43 million in first quarter adjusted EBITDA, up more than eight times over last year’s $5 million. That came from $335 million in net revenue, up 18.8% from the prior year.
Sports betting handle fell 7.4% to $3.128 billion as Caesars scales back promotional offers at the top and bottom of its database, though hold was 7.3% compared to 6.7%.
Online casino handle, meanwhile, jumped 28.3% to $4.488 billion with a 3.6% hold.
