In meetings last week in Las Vegas with Truist Securities analyst Barry Jonas, executives of Caesars Entertainment and MGM Resorts International both laid out upbeat scenarios for the future of their online operations. They also discussed prospects for business in the Persian Gulf.
Caesars executives told Jonas that they believe the company is on track for $500 million in digital revenue by 2025. One way of achieving this is by raising the hold on Caesars-branded sports-gambling products. Management opined that they don’t need to hold as much as market-leading FanDuel and DraftKings do. However, every percentage point of higher hold, over time, should yield $150 million in gross gaming revenue, assuming $15 billion of handle.
A shift by Caesars to the Liberty platform was described as “meaningful,” particularly in Nevada, where the company enjoys nearly 50 percent of the sports-betting market. Outside the Silver State, the company is benefiting from the rollout of the standalone Caesars Palace igaming platform. Cross-selling the internet casino through Caesars Sportsbook, as done previously, was described as ineffective.
ESPN having defected to a new alliance with Penn Entertainment, Caesars stands to receive a $50 million breakup fee. Spread over two years, the money (in Jonas’s opinion) should flow right to the bottom line.
MGM was also characterized as optimistic about its long-term plan for BetMGM, “as the product continues to improve.” The parent company said it was continuing to pursue a wholly owned global strategy, believing that LeoVegas — just launched in the United Kingdom — will succeed on the Continent, too.
Wall Street, Jonas wrote, continues to “swirl” with speculation of MGM trying to leverage the half of BetMGM that co-parent Entain still owns. Until such time as an accord is reached, “the market seems hesitant to ascribe either partner with credit in their valuations.”
Both companies admitted to being at a technological disadvantage to first-movers DraftKings and FanDuel, “which share metrics largely reflect,” Jonas wrote. MGM and Caesars executives reminded him, “The U.S. market is still in its early days, pointing to more balanced market shares in the more mature European market.”
Not to be forgotten, Boyd Gaming drew attention to its partnership with FanDuel parent Flutter. The latter recently made a public tender in the U.S. Boyd execs professed themselves “not overly concerned with the outcome.” Perhaps this is because they didn’t believe, they told Jonas, that Boyd’s five percent stake in Entain was factored into the stock valuation.
Overseas, Caesars said it “would pursue the right opportunity at any location in the market” of the United Arab Emirates. This was despite its exit from a Caesars Palace-branded resort in Dubai, which will become a Banyan Tree hotel. The company retains a right of first refusal on the resort, should Dubai ever legalize gambling.
MGM also has aspirations in the Emirate, where it announced three resorts in 2017, with a projected completion date of 2021. The deployed brands for the non-gaming properties were to be Signature Villas, Bellagio, and MGM Grand. Two years later, the projects remain unfinished. Noted Jonas, “The bulk of the surrounding land is Emirati, which creates some ingress/egress issues.”