Deutsche Bank Analyst Shares Favorable Projections for Caesars Digital

Caesars Entertainment might take action to reinforce its digital gaming business followed continued suboptimal growth, a Deutsche Bank analyst believes. He also projected a property EBITDAR decline of 2% despite a variety of opportunities within the land-based sector.

The Company Is Likely to Bolster Its Digital Business

In an investor note, Deutsche Bank analyst Carlo Santarelli said that he expects Caesars Entertainment’s stock to reach $56 per share in 2025. Standing at $32.51 as of the time of this writing, the shares are poised to benefit from expected investments in digital gaming.

Caesars’ digital business has so far struggled to gain sufficient traction, prompting Deutsche Bank to speculate that additional strategic action will be undertaken to unlock its value. The segment recently narrowed its losses, suggesting that profitability is on the horizon.

Analysts forecast $352 million in revenue for Caesars’ digital unit in 2025 while trading at 12.5x EBITDA. Santarelli, however, believes that the company might exceed these expectations. His forecasts imply that traders do not seem to be aware of Caesars’ true potential, resulting in trading at a significant discount.  

Santarelli pointed out that over half of the company’s EBITDAR stems from wholly-owned land-based assets, suggesting that the aforementioned discount is artificially applied by the market.

Santarelli Expects Caesars LV Strip and Regional Investments to Pay off

In any case, Santarelli is certain that Caesars is poised for a “harvesting year,” projecting that the company will benefit from $250 million of interest savings, $200 million of capital-expenditure savings, as well as $170 million of EBITDAR growth.

The current conditions are perfect for repayment of debts and share-buyback moves, the analyst pointed out. Overall, he is optimistic that Caesars is set to outperform in 2025 and doing better than many of its competitors, especially on the Las Vegas Strip.

Speaking of the famed Strip, the analyst added that the operator’s properties on the Strip will benefit from average daily room rate accretion from its recent investments in multiple venues. In addition to a major investment in food and beverage at The Flamingo, the company also launched a new high-limit slot area at Caesars Palace that is expected to excel throughout the year.

Despite the favorable investments, Deutsche Bank predicted a 2% YOY decline in property EBITDAR, contrary to the consensus, which expects 1% YOY growth.

As for the company’s off-Strip business, Santarelli noted that the company recently ended several years of no meaningful investments in regional markets with the opening of new properties in Virginia and Louisiana.

He believes that the regional business is in a good position to stand up to its regional competitors.

J.P. Morgan Not Thrilled about Caesars Q4

In the meantime, J.P. Morgan analyst Joseph Greff just adjusted Caesars’ Q4 Las Vegas Strip cash flow outlook to $485 million from $499 million. This change came amid various perceived negative factors that hurt the operator’s revenues.

Greff expected table game hold of 22%, as well as unimpressive margins. Suboptimal visitation figures and lack of competitiveness were among the chief reasons for the analyst’s negative forecast.