Caesars’ Vegas and Digital Demand Remain Strong Amid Waning Economic Growth Concerns

As a result of the acquisition of the legacy Caesars CZR business by Eldorado (closed July 2020) and its leading omnichannel presence, we estimate Caesars holds around a high-teens revenue share of the $60 billion domestic commercial casino gaming market. The acquisition roughly doubled the company’s U.S. portfolio to about 50 properties while lifting its loyalty membership to over 60 million from 55 million. Caesars has realized over $1 billion in combined sales and cost synergies from its merger with Eldorado, representing around a 30% increase to pro forma 2019 EBITDAR. Before this recent combination, legacy Eldorado successfully integrated the Isle and Tropicana acquisitions in 2017 and 2018, respectively, with both deals driving about a 30% return on investment, based on our calculation.

Despite this successful acquisition record, we don’t believe Las Vegas and other U.S. gaming regions contribute to a moat for Caesars. U.S. gaming demand is lower than in Asian regions like Macao and Singapore, where the propensity to gamble is much higher. Also, the 1,000 commercial and tribal casinos in the U.S. serve a total population of 334 million, well in excess of the 36 and 2 casinos found in Macao and Singapore, respectively, with Chinese and Singaporean populations of 1.4 billion and 5.6 million, respectively. Further, Vegas room supply is increasing in 2024. This compares with negligible additions in either Macao or Singapore, where we see no additional licenses for the foreseeable future.

That said, Caesars is positioned to benefit from the sports betting and iGaming market, where we see U.S. industry sales reaching $40 billion by 2030 versus $12.5 billion in 2022. Caesars has invested $1.1 billion in its digital assets into 2023, after which the business is expected to start generating profits on an enduring basis. We forecast for 15% of the company’s total sales to be generated from online gaming by 2027.

Finally, we think its $3.2 billion in liquidity (as of June 30, 2023) and $7.2 billion in free cash flow generation through 2027, position it to service the $6.25 billion in debt scheduled to mature in 2024-27.