Ladies and gentlemen, your palace awaits…
That’s the message greeting visitors to the Caesars Palace Online Casino. And unlike all those castles in the movies, this particular palace isn’t located over hill and dale in some far-away forest.
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No, this most congenial spot is just a few clicks away.
Of course, the real world Caesars Palace, which is also operated by Caesars Entertainment (CZR) , is always ready to receive visitors.
The storied location on the Las Vegas Strip opened its doors in 1966. Founder Jay Sarno intentionally removed the apostrophe from “Caesar’s Palace” to suggest that the historic Caesar was not the only one and that every guest would be treated like an emperor, according to Las Vegas Weekly.
Caesars Palace has hosted the likes of such legendary performers as Frank Sinatra, Count Basie, Dean Martin, Liza Minnelli, Tom Jones and Judy Garland.
The casino facilities include table games such as blackjack, craps, roulette and baccarat, as well as a 24-hour poker room and many slot machines and video poker machines.
But now you can also try your luck via the internet.
Analysts reacted to Caesars Entertainments quarterly results.
Caesars digital revenue surges
The history of online gambling goes back some 30 years. The first online gambling venue opened to the general public was ticketing for the Liechtenstein International Lottery in October 1994.
That same year, Antigua and Barbuda passed the Free Trade and Processing Act, paving the way for the licensing of online casinos.
And then Microgaming, an Isle of Man-based software company, established Gaming Club Casino, which is said to have marked the birth of the online gambling industry.
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Since then online gambling, or iGaming, has continued to grow.
Year-to-date through May, iGaming revenue reached $3.32 billion, a 25.9% increase from the year-earlier period, according to the American Gaming Association.
In May, online gambling accounted for 28.4% of total commercial gambling revenue, a decline from the April figure of 30.4%.
And iGaming was a key figure in Caesars Entertainment’s second-quarter results.
“Caesars Palace Online continues to grow as a percentage of our total iCasino revenues,” Eric Hession, president of Caesars Sports and Online Gaming, told analysts during the company’s earnings call.
“We’re actively enhancing the product offerings by adding new and exciting game content including exclusively designed Caesars Themed Games.”
Hession said that Caesars Digital delivered second-quarter net revenue of $276 million, up 28% year-over-year. And the division’s quarterly adjusted Ebitda — earnings before interest, taxes, depreciation and amortization — more than tripled to $40 million from $11 million a year earlier.
“Our product on the sports side continues to improve, and our customers are reacting positively to our increasing mix of parlay and in-game offerings,” he said.
Caesars Entertainment Q2
The Reno, Nev., hotel and casino entertainment company, which operates more than 50 properties, reported quarterly revenue of $2.83 billion. The figure eased 1.7% from a year earlier and missed the analyst consensus estimate of $2.87 billion.
The company broke even, missing the consensus estimate of 13 cents a share of profit.
“We remain encouraged for operating trends in Las Vegas segment based on our forward expectations for continued strong occupancy and hotel pricing trends coupled with the decrease in room inventory on the Las Vegas Strip,” Anthony Carano, president and chief operating officer, said during the call.
Separately, longtime activist investor Carl Icahn has reportedly acquired a holding in Caesars Entertainment. Last month, Bloomberg News reported Icahn had built “a sizeable stake” in the gambling company.
Analyst: digital segment ‘blew away estimates’
Several analysts adjusted their price targets for Caesars Entertainment following the earnings announcement.
Stifel raised the firm’s price target on Caesars to $56 from $54 and affirmed a buy rating on the shares, according to The Fly. The investment firm said that the results outperformed investors’ expectations in the quarter.
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The digital segment “blew away estimates,” and since management has made known that they view the stock as “massively undervalued in the mid-$30s,” the investment firm says the risk/reward balance is “overly compelling at current trading levels.”
Macquarie analyst Chad Beynon lowered the firm’s price target on Caesars to $52 from $55 and maintained an outperform rating on the shares following the quarterly results.
The analyst said the company’s Q2 reported 3% Ebitdar — Ebitda plus restructuring or rent costs — beat estimates. Ebitdar, a non-GAAP measure, is useful for businesses such as hotels, restaurants or casinos that have unique or variable rent costs.
Headwinds are expected to continue in Q3 before trends improve in the fourth quarter with the opening of New Orleans and the Danville, Va., permanent casino, Beynon said.
While some remain concerned by leverage and Vegas/Regional growth, the analyst said Caesars’s position in Las Vegas is strong. He expects the story will remain driven by the company’s ability to improve digital market share and profit.
Overall, Beynon said Caesars has an attractive risk/reward digital profile, given its large database, low marketing/promotional intensity and improving technology.
Jefferies lowered the firm’s price target on Caesars to $60 from $62, keeping a buy rating on the shares.
Las Vegas is building better momentum than anticipated, regional gaming is pivoting from consuming to generating cash, and digital is accelerating profit, the investment firm said. It argued that the quarter from Caesars “highlights the core setup of our thesis.”
Jefferies said that expectations have been reset to “bear an upward bias moving forward.”
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