Caesars Digital Could Be Worth More Than Entire Company, Says Analyst

According to an analyst, Caesars Digital could be worth far more than its parent company, Caesars Entertainment.

Texas Capital analyst David Bain has stated that he believes Caesars Digital could be worth as much as $9.6 billion. This far exceeds the $5.6 billion valuation of Caesars Entertainment (CZR).

In a report to clients, Bain stated, “At even 12.5x CZR’s ~$500 million forward digital guidance, CZR’s digital segment would be worth $940 million+ more than CZR’s current market capitalization.”

As a result, he believes the company may have to reevaluate its strategy in the future. He added, “We continue to believe CZRs management and Board are reviewing certain corporate actions to demonstrate its digital value should its stock price not reflect such by sometime next year.”

Upgrades to the Caesars Palace app, and the launch of the Horseshoe brand have played a big role in the success of the digital sector. Caesars Digital’s revenue in Q2 rose 24% to $343 million, with EBITDA of $80 million.

Bain Recommends Selling Off Digital Assets For Debt Relief

The company as a whole, however, continues to be in $11.29 billion of debt at the end of the second quarter. Bain said that selling off some digital assets could relieve this.

He noted that if Caesars eliminates $5 billion of debt at 7% interest rates, the operator’s annual free cash flow would improve by $350 million, and it would realize $56 million in “theoretical” annual savings by not fully owning the online business.

This week, Caesars Entertainment dropped out of the S&P 500, replaced by companies such as Robinhood. A report indicated that Caesars was one of the lowest paying companies in the index.

Will Caesars Embrace the Changing Gambling Industry?

Rather than selling off digital assets, an alternative would be to more fully embrace the changing landscape of the gambling industry. Caesars Sportsbook does not yet accept esports betting, for example.

Rival betting platforms, such as DraftKings and FanDuel, however, offer the markets and have led the way in digital expansion.

The companies are also actively pursuing avenues into prediction markets. FanDuel has partnered with CME, a CFTC-licensed exchange, while DraftKings is exploring possible partnerships.

Bain rates Caesars a “buy” with a $59 price target, implying the stock can more than double from current levels. However, the price has dropped more than 20% since the start of the year. If the company does not capitalize on its digital sector growth soon, investors may withdraw further.