J.P. Morgan hosted a dinner with management at Caesars Entertainment and came away feeling better about the operator’s Las Vegas prospects. Analysts also raised the possibility of the pursuit of a project in the Middle East and touted the benefit from Taylor Swift concerts in late October in New Orleans.
J.P. Mogan analyst Joseph Greff also said Caesars is confident in its fourth-quarter room revenues and optimistic about its soon-to-be-completed projects in New Orleans and Danville, Virginia, which should position each to be top-five-property EBITDA producers in the segment. He also cited icasino and digital momentum and the company’s ability to deleverage and improve its balance sheet.
But the Middle East comment is new in commentary.
“Given Wynn’s investor event (at G2E) was focused on its Middle East (on Al Marjan Island in the UAE) opportunity, we believe Caesars, like others, is actively pursuing something in the region.”
Caesars is seeing no change from its previous expectations for Las Vegas EBITDA to show flat-to-modest growth in the third quarter and indicated trends for the fourth quarter feel stable, with F1 trending toward a similar level of EBITDA contribution as 2023. That’s despite investor concerns of demand weakness around the event, Greff said.
“Additionally, Caesars noted it has easier comparisons in the fourth quarter as it laps last year’s wage-compensation accruals and room renovations at its Versailles Tower, which are generating meaningful uplift in average daily rates (up 60% year over year during the second quarter). In terms of capital projects, Caesars is currently undergoing a revamp of its high-limit area at Caesars Palace, which will add about 30% gaming-area square footage and should be open by F1 in mid-November.”
For its regional properties, trends are largely stable to moderately softer on a year-over-year basis with continued bifurcation at the lower end, Greff said. Caesars noted that the third quarter will be the low point in terms of the impact from construction disruptions, particularly in New Orleans, but he said to expect the regional segment to be flattish in 2025, with returns from the completion of its New Orleans renovations and the opening of its permanent facility in Virginia offsetting competitive pressures in certain markets.
“Management called out significant strength at its New Orleans property for opening weekend (10/25-10/27), with more credit out for the weekend than for Super Bowl weekend, largely driven by Taylor Swift’s slate of shows at the Caesars Superdome.”
On the digital front, management noted continued strength and momentum in its igaming product, particularly from Caesars Palace Online, complemented by last week’s launch of the Horseshoe icasino app in Michigan. That creates a multi-brand approach that should enable incremental customer acquisition and cross-sell, particularly given the standalone apps’ more slot-focused customer compared to its online sports betting/icasino integrated app. That app has historically seen a more sports-first table-game-centric customer.
“Caesars’s acquisition of sports betting technology provider ZeroFlucs is already providing meaningful benefits to its online sports betting product capabilities, particularly around the depth and breadth of its same-game parlay functionality through improved combinability of correlated bets.” Greff said. “That’s providing a step-change to its overall parlay mix and online sports betting hold rate.”
Caesars highlighted an acceleration in parlay-mix growth versus the first half of the year, which now sits in the low-20% range after being in the mid-teens last year. “It sees an opportunity to reach the mid-to-high 20% range going forward,” Greff said.
Caesars noted that it’s reaching the end of its product investment phase and expects to generate meaningful EBITDA flow-through going forward as the platform continues to scale and mitigates some third-party costs (that are now in-house), technology headcount, and fixed marketing partnership costs, Greff said.
“The next meaningful partnership coming up for renewal is the NFL in the first quarter of 2026, which we expect the company to renew, albeit at a much lower commitment. In terms of omnichannel, management called out low penetration (relative to expectations) to this point, but expects an elevated rate of cross-sell from its land-based properties to its standalone icasino apps and noted that customers who are cross-sold tend to increase their spend across all channels. On legalization, Caesars is not expecting any new states to legalize online casinos in 2025.”
