Definitely maybe
Crystallizing the value of Caesars Digital comes with complications
Spinning out Caesars Digital won’t happen quickly – if at all.
In +More: Star in need of rescue, PointsBet rebuffs BlueBet.
Earnings TL;DR: Penn Entertainment, Rush Street, Kambi.
The long takes: DraftKings and Flutter under analysis.
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Mind the gap
Shakermaker: Caesars Entertainment’s CEO believes there are “dollars left on the table” between the company’s current valuation multiple as a largely B&M business versus what investors might pay for a pure-play online business.
Talking to analysts earlier this week, Tom Reeg noted Caesars is currently valued at between 7x-8x its forward EBITDA.
In comparison, DraftKings currently trades on a 2025 EV/adj. EBITDA of nearly 22x and 16x the 2026 number.
The equivalent multiple for Rush Street Interactive, meanwhile, is 21x the 2025 adj. EBITA estimate and 16x that of 2026.
Avenues and alleyways: Reeg said it was a “natural time” to start thinking about “doing something else” strategically to crystalize value in a business that the company maintains is on the path to generating $500m in adj. EBITDA, albeit in an unspecified timeframe.
If Caesars Digital continues to “grow as it has,” he added, then it is only right the parent looks at “any and all avenues” for how to “drive the most value” for shareholders.
The bronze age: According to the Q4 earnings, Caesars Digital achieved revenues of $1.16bn in 2024 and an adj. EBITDA of $117m, a total that makes it the third-largest online company by EBITDA.
The analysts at Citizens said the “catalyst for valuation” should come via continued execution.
But if that failed to ignite the shares towards a multiple more in line with its peers at ~15x, then they believe Caesars “will look more closely at strategic actions.”
Putting it out there: Gauging the seriousness of Reeg’s intention and whether the company has already spoken to its advisors is “difficult,” suggested Joel Simkins, founder at advisory firm XST Capital.
“This latest posturing is perhaps a litmus test for the market to gauge sentiment on a breakup,” he added.
“I definitely wouldn’t expect a transaction to be immediate or imminent.”
Weights and measures: The debt team at CBRE noted the discussion around digital valuation but noted any move would have an impact on the group’s credit profile. The proceeds from any “potential monetization” such as a partial float could accelerate Caesars debt paydown.
“But it would be weighed against the potential loss of EBITDAR from either a spin or minority sale,” the team added.
Leaner, meaner: Still, the prospect of a standalone business would, as Simkins said, “make considerable sense,” and not because of a boosted multiple.
Free from the “cruise ship” characteristics of a big B&M business, a leaner Caesars Digital would be able to “make decisions quicker,” take calculated risks and move in other verticals such as sweepstakes.
“It’s potentially a more compelling story,” Simkins added, noting that it was likely being “hamstrung” by balancing B&M priorities and the desire for profitability.
Dis-loyalty: Meanwhile, CBRE noted there would be “challenges” in separating the digital business from the Caesars Rewards program. Reeg said on the call that any transaction Caesars pursued “would shut it out of that.”
CBRE said this factor made an outright sale an “unlikely outcome.”
Reeg added on the call, however, that “if you’re talking about something modest in terms of difference and a significant multiple discrepancy” then he didn’t think that would be a “determinative piece of the puzzle.”
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+More
Sinking fast: Star Entertainment halted trading in its shares on Friday after admitting it was expecting bailout offers and failed to submit its H125 earnings due on the same day. The shares fell over 15% ahead of the trading halt. The troubled casino operator said in a statement it expected “one or more liquidity proposals.” Blackstone, Bally’s and Oaktree Capital have all been previously linked with a rescue.
PointsBet knocked back the bid from rival Australian bookie BlueBet over concerns the Matt Tripp-led company did not have the funding in place to complete the deal and lacked detail on how cost savings could be found. The BlueBet offer came a day after the board recommended shareholders accept the A$353m ($219m) offer from Japanese entertainment business Mixi.
Melco Resorts has retained advisers CBRE and Moelis to evaluate potential strategic options regarding the managed and operated City of Dreams Manila resort. The company said no decision has been made nor would the process definitely result in any transaction. The news came with the Q4 earnings showing revenues up 9% to $1.19bn and adj. property EBITDA down 3% to $295m.
Nevada saw gaming revenue rise 12.5% YoY to $1.44bn with the Strip notching up a 22.5% leap to $840m, helped by significantly better baccarat hold. Las Vegas Locals was down 1% at $282m. The analysts at Truist said the year was off to a good start but noted that February would likely be “softer.”
Quick take: Penn CEO Jay Snowden made multiple mentions during yesterday’s call with analysts that the company has “levers to pull” when it comes to the ESPN Bet business if it failed to show progress in the year ahead. The team at Truist said that might include “scaling down of marketing dollars, a slimmed down cost structure and other changes” up to the time the three-year anniversary rolls around in 2026 when, as the analysts noted, “both sides have opt-outs.” See Earnings TL;DR below.
Read across
War party: The Indian Gaming Association is among the gaming sector stakeholders to have lobbied the US Commodity Futures Trading Commission to maintain the prohibition on gaming prediction markets. The AGA, meanwhile, said the gaming industry has serious concerns about prediction market sports event contracts. In Compliance+More.
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Earnings TL;DR
Penn Entertainment
Gimme a break: The interactive business racked up losses of half-a-billion dollars in 2024, but despite this CEO Jay Snowden insisted the interactive business would hit break-even for the year ahead with the first positive adj. EBITDA quarter predicted for Q4 this year.
He said the company continued to believe digital represented a “once-in-a-lifetime” opportunity to counter the company’s otherwise aging audience in its B&M business.
Still, Snowden admitted ESPN Bet was “not on course” to hit a podium position but suggested it had levers at its disposal.
Cold feet: He noted 2026 marked the third year anniversary break clause at which point both Penn and Disney, the owner of ESPN, “will have to do what’s in their best interest.”
Are you not entertained? In the B&M business, Todd George, VP of operations, said that post-election trading had been buoyant both in Q4 and in non-weather-affected periods in Q1. “People are coming out and still taking time to be entertained,” he said.
See yesterday’s Earnings Extra for more – E+M PRO subscribers only.
Rush Street Interactive
Focusing the mind: CEO Richard Schwartz argued the rise of sweepstakes gaming was helping to focus minds, both in legislatures and among operators, on making a greater push for iCasino legislation.
Debates about tax increases pushed in a similar direction, making lawmakers aware of iCasino potential to fill budgetary gaps.
Nine in a row: Schwartz was talking after the company achieved its ninth successive quarter of beating expectations, and notably the average YoY revenue growth rate across the last four quarters stands at nearly 34%.
Revenue in Q4 was up 31% YoY to $254m while adj. EBITDA tripled to $30.6m, taking that figure for the year to $92.5m, up from $8.2m in 2023.
See yesterday’s Earnings Extra. PRO subscribers only.
Kambi
New deals, new you: After a brace of new deal announcements earlier in the week – the extension of a backend provision arrangement with BetCity and the potential transfer of the Ontario Lottery and Gaming sportsbook from FDJ – CEO Werner Becker was upbeat on the company’s prospects, despite flat revenues and falling EBITDA.
The new deals include the Odds Feed+ arrangement with Hard Rock Digital in the US and Rei do Pitaco in Brazil.
Brazil’s importance is clear after it went live in the market with five partners, including Stake, KTO and BetMGM’s partnership with Globo Group.
Horns of a dilemma: Becker confronted the difficulties operators face over prediction markets in the US, noting that while their offerings are limited the prospect of being allowed in 50 states “could be a threat” to existing operators.
See Wednesday’s Earnings Extra. PRO subscribers only.
In brief
Galaxy Entertainment: Q4 revenue was up 9% YoY to HK$11.3bn ($1.45bn) while adj. EBITDA for the period was up 15% YoY to HK$3.3bn and a 10% sequential rise. FY24 revenues were up 22% YoY to HK$43.3bn while FY adj. EBITDA rose the same percentage to HK12.2bn. The company said it had capitalized on the “emerging trend” of entertainment in driving visitation with the Galaxy International Convention Center and Galaxy Arena playing “important” roles.
Golden Entertainment: A sequential improvement saw Q4 revenue come in at $164m while adj. EBITDA stood at $39.2m. Both totals were down on last year due to the prior-year period including the results from the Nevada-distributed gaming business sold in January 2024. FY24 revenues came in at $667m while adj. EBITDA hit $155m.
Accel Entertainment: Revenues in Q4 hit a record $317m, up 7%, while FY24 revenues rose 5% to $1.2bn. Adj. EBITDA was up 6% to $47.4m and for the year it increased 4% to $189m. Over the period, Accel entered Louisiana via the acquisition of Toucan Gaming and closed on its acquisition of FanDuel Sportsbook & Horse Racing.
BetMakers said H125 revenue came down slightly YoY at A$41.4m ($25.7m) while adj. EBITDA losses narrowed slightly to A$1.3m. Earlier this month the company completed a deal with Sportradar for the distribution of BetMakers’ horse-racing betting solution.
In its first quarterly earnings statement as a standalone business, GIG Software said revenues fell 3% to €8.8m while at an adj. EBITDA level the company barely broke even. On a FY basis, revenue fell 15% to €31.8m and adj. EBITDA tumbled to a loss of €3m.
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The long take – DraftKings
Glad handing: Having done a round of meet and greets with the analysts, DraftKings got its due reward with a brace of new notes looking at the company’s prospects, with both Deutsche Bank and Jefferies noting the management team’s confidence for the year ahead.
DB said the company’s guidance for 2025 “left some wriggle room,” but noted some of that could be eroded if New Jersey hikes taxes as mooted by Gov. Phil Murphy.
The adventure game: More tentatively, DB said the discussion ranged over the “chose your own adventure” uncertainties around prediction markets and the upcoming CFTC roundtable.
The team reported DraftKings’ management viewed the dynamics as “largely favorable.”
However, the analysts noted the response of state gaming regulators to having a federally recognized product competing with their state gaming interests would be illuminating.
They also suggested the tribes would “put up a fight.” See Compliance+More. “Should operators seek to enter these markets, it could, down the road, damage any chance of the licensed operators entering a partnership with the tribal entities,” DB added.
Quick take – Flutter
The biggest and the best: In initiating, the analysts at Truist acknowledged Flutter’s status as the largest gaming company by market cap and added that this implied it could become the largest by revenues and profit.
Noting that B&M gaming is “largely mature,” future growth will necessarily come from online, particularly in the US.
The analysts said that with Flutter’s FanDuel, as the “investing phase inflects to profitability,” they were confident it would be able to maintain its product-driven lead in sports betting, while benefiting as online casino penetration increases.
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Upcoming earnings
Mar 4: Flutter Entertainment, Lottomatica, Genius Sports
Mar 5: Bally’s
Mar 6: Entain, FDJ, Full House Resorts
Mar 10: Playstudios
Mar 20: Gambling.com
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