Despite its status as the biggest casino operator in the U.S. by the number of venues, Caesars Entertainment (NASDAQ: CZR) is not receiving enough credit from investors for its online business, according to a recent report from Barclays analyst Brandt Montour. The analyst believes the gaming company has significant potential to unlock value through its Caesars Digital unit, which includes an internet casino and online sportsbook.
Montour has assigned a $70 price target to Caesars stock, implying an upside of about 55.5% from the March 29 close. This forecast includes an estimated $10 value for Caesars Digital on a standalone basis.
While Caesars is a well-known brand in the land-based casino business, it has yet to translate into significant market share in the online gaming and sports betting spaces. Caesars Digital incurred a net loss of $5 million in the fourth quarter of 2022, mostly due to a single bettor winning big on the World Series. But the company is taking steps to become more profitable, such as reducing its marketing spending.
Additionally, Caesars can leverage its brick-and-mortar casinos and loyalty program to attract more online bettors and provide additional value to the parent company. As more iGaming operators move closer to profitability and some reach it, investors have begun to take a more positive view of digital businesses within the traditional gaming sector, and Montour believes this trend will continue into 2024.