UPDATE: A new evaluation reveals that the digital branch of Caesars Entertainment could now exceed the entire company’s market value. Analyst David Bain from Texas Capital has indicated that Caesars Digital may be valued as high as $9.6 billion, significantly surpassing Caesars’ current market value of approximately $5.3 billion.
Bain’s assessment highlights a critical moment for Caesars, as he outlines potential valuations based on enterprise value-to-EBITDA ratios. Even under conservative estimates, the digital division’s worth could reach around $6.25 billion by 2026. This revelation comes amid growing concerns among investors, including activist investor Carl Icahn, who believe that the market undervalues Caesars’ digital operations.
Recent figures support this valuation. Caesars Digital reported a remarkable 24% revenue growth in the second quarter, totaling $343 million, with EBITDA hitting $80 million. This surge has ignited discussions about a potential spin-off of the digital division, which could alleviate Caesars’ substantial $11.3 billion debt.
Caesars Could Unlock Billions in Savings
Selling a majority stake in the interactive division could be revolutionary for Caesars. Bain’s calculations suggest that if the company sold 80% of its digital operations at the lower end of the valuation spectrum, it could reduce debt by a staggering $5 billion. This strategic move would lower leverage ratios and enhance annual free cash flow by about $350 million.
While Caesars continues to trail behind competitors like DraftKings and FanDuel in sports betting, it is gaining ground in the more lucrative iGaming sector. Enhancements to the Caesars Palace app, which ranked third in industry evaluations, and the recent launch of the Horseshoe brand have significantly contributed to this growth. The integration of online and offline offerings through enhanced casino host strategies is further amplifying their reach and effectiveness.
Bain has maintained a “buy” rating for Caesars with a target price of $59, more than double its current trading price. He emphasizes that the company’s future growth will increasingly hinge on how it leverages the value of its digital business.
As developments unfold, stakeholders are urged to pay close attention to the actions Caesars might take to showcase the real worth of its digital operations in the coming months. The situation remains fluid, and both investors and analysts are watching closely for any significant changes that could reshape the landscape of Caesars Entertainment.