Digital was the star of the second quarter for Caesars, which missed consensus estimates for its Las Vegas and regional gaming segments.
Analysts had a mixed reaction to Tuesday‘s results, which included a soft second quarter in Las Vegas and should be followed by a slow third quarter as well.
Despite the direction of their target changes, analysts continue to rate Caesars at buy as the stock remains undervalued.
Caesars shares opened Wednesday at $28.49, up just slightly over Tuesday’s $28.47 close.
Stifel: Caesars ‘overly attractive’
Steven Wieczynski of Stifel says the risk/reward for Caesars is “too compelling to pass up” at the current price. He notes some are still wary about the stock considering Caesars’ debt and Las Vegas concerns, but he believes the company is in a good position for its long-term outlook.
“We believe the setup for 2H25/2026 is overly attractive and believe the risk/reward at current trading levels is too compelling to pass up, thus we believe investors should be revisiting the CZR story,” he said. “2H25/2026 consensus estimates are set in a manageable/beatable position (and any kind of beat should be good enough right now), sentiment remains low, and we believe there are avenues CZR can explore (i.e. IPO/spin/combo Digital platform) to delever their balance sheet.”
His price target rose to $45 as he raised EBITDA estimates for future years around 4%, removing “conservatism” from former estimates based on the current environment and fewer concerns over future trends.
Others lower Caesars targets
Steven Pizzella of Deutsche Bank ($50, -$1), Chad Beynon of Macquarie ($40, -$5), and Barry Jonas of Truist ($37, -$1) all lowered their targets as they tweaked estimates based on the performance of land-based segments.
Pizzella said the company is set up favorably for the long term as free cash flow is growing to pay down debt, regional property upgrades are wrapping up, and Digital continues to grow while getting “little credit toward valuation.”
Jonas also sees a “strong path to deleverage” with ramping free cash flow as Digital shifts into a profitable business. The stock should have a premium valuation since the company still owns more than half of its real estate, which could be monetized through a REIT deal, he added.
Beynon maintained his outperform rating despite the “murky” near-term outlook. Digital growth and lower capital expenses will highlight that the shares are “too cheap,” he added.
Caesars Digital spinoff coming?
Jonas asked for an update on the possibility of spinning the Digital segment off into its own publicly traded company.
Caesars CEO Tom Reeg noted the segment is well on its way to hitting the $500 million or more in annual Digital EBITDA and any plans for a spinoff will have to wait until that runrate is hit.
“… we’ll take a look at what we think of value at that point, whether we’re getting it reflected, but we would absolutely pursue a separation if we believe that it would drive significant value to our shareholders, and we think we’ll be in position where we’re at our targets at some point in the first half of ’26,” Reeg said.
Management on future Digital growth
Reeg remains bullish on his $500 million in annual Digital EBITDA, especially in a few years.
“I’ve taken so much grief over the $500 million target that we’re right on the precipice of, I’m hesitant to immediately put another target out there,” he said. “But I’d say we’re going to generate substantially more than $500 million of EBITDA from Digital, if you’re looking out a few years here.”
Caesars launched its shared Digital wallet in Nevada earlier in July, which BetMGM reported led to significant growth. Key online casino jurisdictions, including Michigan, New Jersey and Pennsylvania will launch the universal wallet by the end of Q1 2026.
Partnership expenses continue to roll off, Reeg said. There are more than $70 million in those costs that will fall off at the end of 2027, with more than half of those costs ending in the first four months of 2026.
The long-term sports betting hold target remains 10%, COO Anthony Carano said. The mix of parlays, same-game parlays and cash out are all growing and “contribute significantly” toward increased hold.
There is no need to look at international expansion just yet, Hession said, noting the “full road map” of opportunities domestically.
Detailing Q2 Digital results
Digital EBITDA hit $80 million in the second quarter, doubling the result from Q2 2024, while revenue grew 24% to $343 million. That EBITDA growth was technically higher since last year included about $8 million in EBITDA from the since sold World Series of Poker brand, Reeg noted.
Sports betting hold jumped 1.7 percentage points to a record high 8.9% for the quarter, according to Eric Hession, president of Caesars Digital. That was aided by total parlay mix growing by 2.8 percentage points, and a higher cash out mix. Handle was roughly flat on 2024.
On the iGaming side, volume, hold and average monthly active users all saw “continued strength,” Hession said. Caesars has two proprietary games on its online platform now with a third planned for an August launch and its first slot title launching in September.
“As we head into the back half of 2025, I’m becoming more and more optimistic as I see how customers are reacting to the improvements we have made in our application,” Hession said. “The continuous progress made in all areas is showing up in our top line results and our focus on spending efficiency is driving solid flow-through to EBITDA.”
