Caesars Entertainment

Caesars' second-quarter revenue increased 3%. Adjusted EBITDA declined 4%, weighed by higher general and administrative expense. The company did not host a conference call due to its agreement to be acquired by Fertitta Entertainment in May.

Why it matters: Even as we see an improving calendar lifting Vegas growth through 2028, the shareholder focus is on the proposed acquisition. We expect the deal to close and enhance Caesars' existing 50 casinos by adding the Golden Nugget brand and Fertitta's restaurant and entertainment assets. Vegas stands to benefit from the NCAA national football championship in 2027, while 2028 has the NCAA basketball Final Four, the start of the A's MLB team playing games, and a potential NBA expansion team. We see Vegas sales growing 2% in 2027 and 3% in 2028, up from 1% in 2026. With Caesars' largest peers, Las Vegas Sands, MGM (which has a takeout offer from Barry Diller), and Wynn, having limited financial flexibility, and massive capital spending plans to expand in existing and new markets, we don't think a bidding war for Caesars will emerge.

The bottom line: We plan to maintain our $31 per share fair value estimate, which is Fertitta's offer for no-moat Caesars. We maintain our $36 per share standalone valuation. Investors seeking gaming exposure should consider narrow-moat DraftKings, trading at a 45% discount to our $45 fair value. We think Fertitta's terms discount Caesars' integration execution of extracting synergies, driving cash flow, and reducing leverage. This is seen in the past Isle, Tropicana, and Eldorado deals that we calculate averaged about a 30% return on invested capital. Regional sales increased 9% after Caesars completed $3 billion in investments to upgrade properties that represented about 74% of trailing 12-month EBITDA in the segment. Within a competitive landscape, we see the outlays enduring low-single-digit revenue growth through 2028.

Our fair value estimate for no-moat Caesars is the $31 per share deal offer from Fertitta Entertainment. We maintain our $36 standalone valuation. We think Fertitta's acquisition is likely to be approved and don't expect any competitive offers. Our stand-alone valuation applies an 8 times enterprise value/EBITDAR multiple on our 2027 EBITDAR forecast. Drivers of our forecast remain anchored in revenue and EBITDA margins across the company's Las Vegas and regional assets.

Caesars' second-quarter revenue increased 3%. Adjusted EBITDA declined 4%, weighed by higher general and administrative expense. The company did not host a conference call due to its agreement to be acquired by Fertitta Entertainment.

We see signs of improving demand at Caesars, driven by secular AI, onshoring manufacturing, and infrastructure investments across the US, as well as the completion of regional renovations and a favorable calendar in Vegas. Caesars' Vegas resorts stand to benefit from the NCAA national football championship in 2027, while 2028 entertains the NCAA basketball Final Four, the start of the A's MLB team playing games, and a potential NBA expansion team.

For 2026, our stand-alone Caesars revenue growth for its physical assets is 2.2%, with growth of 2.0% in 2027 and 2.4% in 2028. Our 2026-35 annual revenue growth forecast for Las Vegas and the region is 1.8% and 1.7%, respectively. We see Las Vegas EBITDAR margin averaging in the mid-40s and regional EBITDAR margin averaging in the low-30s in 2026-35.

We model a low single-digit digital revenue share for Caesars. We see digital revenue rising to $3.1 billion by 2035, up from $1.4 billion in 2025. We continue to expect the digital segment's profit margin to ramp up to 25% in 2035 from 17% in 2025. We expect Caesars’ digital revenue growth and margin to average 9% and 24%, respectively, during the next 10 years.

We expect Caesars to endure synergies from its merger with Eldorado, with a 2030 EBITDAR margin of 34% versus 31% in 2021.

Despite management’s record of value-enhancing acquisitions (namely Isle in 2017, Tropicana/Grand Victoria in 2018, and the Eldorado merger in 2020), we don’t believe Caesars has an economic moat due to its outsize exposure to Las Vegas (48% of 2025 EBITDA) and US regional markets (49%) where regulatory barriers are low. This stance is supported by Caesars’ 6% return on invested capital, or ROIC, including goodwill, in 2025, which sat below its 9% weighted average cost of capital, or WACC. Also, we don’t ascribe much weight in the very marginal economic profit we forecast for the company at the start of the next decade (2032 estimate ROIC of 9.1%) as that result is driven by Caesars’ participation in an improving US digital market, which we project to remain a small minority of total EBITDA (14% in 2032).

We don't think Caesars will form an economic moat with the proposed acquisition by Fertitta Entertainment, as the incremental assets are in the competitive US region. With the deal, Caesars’ casino portfolio increases to more than 60 casinos, compared with more than 50 properties and just four in 2014. Caesars' share of the $79 billion US commercial gaming market has risen to about 8% in 2025 from less than 1% in 2014. We attribute these gains to its ability to identify and integrate acquisitions, like Isle and Tropicana/Grand Victoria in 2018 and Eldorado in 2020, that generated enhanced value for shareholders, with the three acquisitions averaging more than a 30% return on invested capital.

Although we believe Eldorado’s acquisitions have added shareholder value and some support for a brand intangible asset advantage, the ability to repeat this is challenged by management needing to lower debt leverage the next few years to be in a financial position for inorganic growth as well as there being fewer sizable take-out candidates. Also, the company’s acquisition strategy is overshadowed by competitive barriers in the US gaming industry that are too low to warrant a moat for the company. Due to lower barriers, the US gaming market has more supply than its Asian counterparts. This is illustrated in the US’ 1,014 commercial and tribal casinos in 2025, compared with just two and about 50 casinos in Singapore and Macao, respectively. This regional casino supply results in one US casino for every 330,000 people versus 3 million and 28 million Singaporean and Chinese citizens per Singapore and Macao gaming property, respectively. Also, we do not expect additional gaming licenses in the foreseeable future in either Singapore or Macao, while there has been incremental legalization of gaming in the US casino industry over the past 30 years. As a result of supply expansion, US casinos typically achieve single-digit ROICs versus the low double digits for Singapore and Macao integrated resort operations, supporting our no-moat rating for Caesars.

In addition to a heavily supplied US physical gaming market, online sports betting and i-gaming continue to expand across more states and markets, presenting additional avenues for individuals to wager and potentially cannibalizing activity at traditional casinos. In fact, during the last several years, more than 30 states and predictive platforms have launched online sports betting, with others offering i-gaming. Although covid has made it tough to determine if online betting is eating away at the demand for physical wagering, we note that US physical gaming revenue grew 2.3% in 2025, near the 1.8% in 2019 before the pandemic.

That said, we are constructive on the revenue opportunity of the US digital industry and think the segment is an incremental driver for Caesars’ consolidated ROICs long term, although not enough to tip the scale toward an economic advantage. To this point, we estimate US digital industry sales of $61 billion by 2030 from $27.5 billion in 2025, as more states legalize the activity. And even though we view the market as competitive, with dozens of operators, we forecast Caesars’ digital share to hold at a mid-single-digit percentage and expect margins to expand to the mid-20s later this decade from 17% in 2025. While this margin prognosis sits below the mid-30s and mid-40s for the company’s regional and Las Vegas assets, we believe it will be achieved with far less invested capital, thereby enhancing consolidated ROICs. Our positive stance is despite the competitive risk of predictive event platforms, which we think will mostly expand the opportunity for traditional online sports betting companies.

Caesars' best-of-breed management has generated cost and revenue synergies from its merger with Eldorado.

Stand-alone Caesars has the largest property (around 50 domestic casinos versus roughly 30 for MGM) and loyalty presence (more than 60 million members versus MGM's more than 45 million) in the US, which presents cross-selling opportunities.

We see Caesars' domestic properties as well positioned to benefit from the $61 billion US sports betting, i-gaming, and predictive revenue opportunity by 2030.

Debt levels are elevated after the merger with Eldorado, which could raise financing costs for future renovations and investment.

All cash flow for the company comes from the domestic regions, which have lower barriers, demand, margins, and ROICs than Macao.

Caesars faces many competitors in the US sports betting and i-gaming markets, including Penn, DraftKings, FanDuel, MGM, Fanatics, and predictive event companies Kalshi and Polymarket.