It is not the right time to spin Caesars Digital off into its own entity, CEO Tom Reeg said on Tuesday‘s earnings call.
Caesars has repeatedly talked about different ways it can better extract value out of the Digital business as its share price has struggled to reflect the value. One likely option includes an IPO to separate the online casino and sports betting business out from under the Caesars umbrella, but that is not happening in the near term.
“I would say given what we’ve seen in valuations in the space over the past six to nine months, this doesn’t seem like a market that screams you should come and offer some equity of any kind,” Reeg said during the company’s year-end earnings call. “So unlikely you see something in the near term.”
For now, the focus remains on hitting $500 million in annual Digital EBITDA and continuing to prove the business can scale, Reeg added.
Caesars stock up, analysts temper expectations
Caesars opened Wednesday at $19.92, up 5.1% from Tuesday’s closing price and was up around 15.5% at 11 am Eastern. Analysts are mostly staying bullish on the stock with tweaked expectations but still see Digital as a growth point.
- Barry Jonas of Truist rates Caesars at buy with a $29 target, down from $30. He trimmed his Digital forecasts for the next two years but said the online gaming arm has solid performance indicators and “no noticeable impact” from sports predictions.
- Chad Beynon of Macquarie maintained his outperform rating with a $32 target, down from $33. The biggest story for Caesars is the leisure demand in Las Vegas, but the story is more simplified and de-risked that prior years, he said.
- Steve Pizzella of Deutsche Bank trimmed his target to $35 from $36 and kept his buy rating, noting that Digital will continue to improve while the company waits for a potential spinoff.
- Steve Wieczynski of Stifel said the risk/reward of Caesars “just can’t be ignored right now,” as he maintained his buy rating with a price target of $36, down from $39. He left the question of owning the stock up to whether the potential owner believes business on the Las Vegas Strip will rebound or not.
Sports betting hold should continue to climb
Caesars should continue to grow toward its goal of hitting a 10% hold in sports betting, said Eric Hession, president of Caesars Digital.
The investor presentation shows Caesars’ structural hold target climbing around 1 percentage point each year, with it hitting 8.1% in 2025 compared to 4.3% in 2021. That has not happened because of one single action but rather a bunch of decisions that have made the overall product better for customers.
The growing mix of parlay bets and live betting help with that hold, Hession said. Parlay bets as a percentage of total handle rose 2.1 percentage points as well as more average legs per parlay.
Hession said he is confident that steady growth rate should continue, though he’s hopeful for an outperformance in 2026.
“As we look forward to the full year of 2026, I’m pleased with the significant progress on the technology side of the business that’s driving strong customer engagement in both sports and iCasino,” Hession said.
Sports predictions are ‘clearly gambling’
Reeg preempted questions about sports predictions in his opening remarks, qualifying them by saying “we’re no smarter than you in terms of what will happen.”
“To me, this is clearly gambling,” Reeg said. “I think it will take a couple of years to wind its way through the courts, and you’ll have a patchwork of states where they’re not allowed, states where they’re allowed.”
Caesars simply cannot take part in predictions at this moment since some states where the company holds land-based casino licenses have clearly said no to its licensees offering sports predictions. Caesars is not interested in risking those licenses for predictions, he said.
But, if there is clarity that a legal way to offer predictions is coming that keeps those licenses in tact, Caesars will “find a way to participate,” Reeg said. So far, Caesars has not felt an impact from sports predictions, he added.
Hopeful for online casino in Virginia
Legalized online casino in Virginia would be a “very good outcome” for Caesars, Reeg said. Both chambers in Virginia have passed their own iGaming bills, but there are differences that will need to be fixed at a conference committee.
“The fact that we’re still alive at this point in the session is a good sign for brick-and-mortar operators,” Reeg said. “There’s make well payments as part of the legislation that would benefit us. So our fingers are crossed in Virginia, that would be a very good outcome for us.”
There is no indication of which state could debate online casino next, but Reeg said these kinds of conversations can come together “very, very quickly” and not be on someone’s radar. At the beginning of the year, Caesars would have said it is not “particularly optimistic” that any online casino legislation would see traction this year.
Reeg sees the potential for Maine to hit $55 million a year in EBITDA.
Fixed marketing expenses to drop
This year and 2027 will see significant marketing dollars fall off around football season, which will help get to that $500 million target.
“Everybody knows the targets that we have out there for digital,” Reeg said. “We still expect to exceed them as we move forward.”
Reeg said a little over $35 million will fall off the books this year with another $20 million ending next year. Some of that will be reinvested elsewhere but the majority will be a “significant booster for growth for us as we move forward,” he added.
Olympics not ‘huge’ but bullish on World Cup
Hession noted there is always interest around the Olympics, but that is mostly the Summer Olympics with 80% of that action coming on basketball. The Winter Olympics are “fine” but doesn’t “drive a huge amount of volume for us,” he said.
The World Cup, on the other hand, is a real opportunity for Caesars, Hession continued.
“We plan to offer a number of promotions,” Hession said. “We’re planning to really revamp the offerings that we have in terms of the markets that we list for soccer leading up to the World Cup. And so from that perspective, the World Cup is something that will drive significant volume and some hopefully good outcomes on the winner side.”
