iGaming, Not Casinos, Powering Industry Growth, Says Analyst

As the digital landscape continues to evolve, the core of the gaming industry’s expansion is found in the rapid rise of iGaming. As the digital landscape continues to evolve, the core of the gaming industrys expansion is found in the rapid rise of iGaming, where internet casinos have become the primary engine for global growth.

• Recent updates from BetMGM and Caesars Digital confirm as much

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Second-quarter earnings reports from Caesars Entertainment (NASDAQ: CZR) and MGM Resorts International (NYSE: MGM) revealed expected softness on the Las Vegas Strip, with further challenges anticipated for the current quarter. In contrast, developments in iGaming paint a much brighter picture.

However, as noted by Jefferies analyst David Katz, operators face a dilemma when it comes to pleasing investors through digital growth. Market participants are not giving praise to interactive improvements unless all segments of the business are performing robustly.

David Katz noted, “Near-term concerns regarding weakness on the Las Vegas Strip and, in the case of CZR, regional negative productivity, are overshadowing digital acceleration. If estimates are finally low enough in land-based operations, the digital sector can earn credit in our view.”

For MGM and Caesars, luring investors to focus more on digital growth will be a challenge in the short term since both are the largest operators on the Las Vegas Strip, a segment currently grappling with diminished visitor numbers.

Mounting Signs of iGaming Acceleration

Despite the slower land-based market, there are overt signs of growth in iGaming. Recently, BetMGM and Rush Street Interactive (NYSE: RSI) raised their 2025 revenue forecasts, while Caesars declared that their interactive division just experienced one of its most successful quarters to date.

The scenario is possibly more acute for MGM since it only owns half of BetMGM, with the other half held by UK-based Entain. On the other hand, Caesars has voiced continual concerns that their online business prowess isn’t accurately depicted in their stock prices, with some speculation surrounding the idea that they might spin off that segment to enhance shareholder value.

Katz remarked that even though BetMGM and MGM China’s second-quarter results were impressive, they were insufficient to counterbalance the weakness experienced in Las Vegas operations due to MGM’s partial ownership of these entities, including a 56% stake in the Macau unit.

Caesars Digital Trending in Right Direction

Currently, Caesars Digital is on a positive trajectory, approaching a $500 million annual run-rate for earnings before interest, taxes, depreciation, and amortization (EBITDA), according to Katz. Nevertheless, the operator will likely need to significantly improve its performance across its land-based operations to encourage investors to pay more attention to the online aspect of its business.

This was notably evident in the second quarter when weak performances in Caesars’ Las Vegas and regional markets overshadowed binary strengths in the digital segment.

“CZR has the assets to lead, but it needs to perform better. We concur with the prevailing view that current estimates are finally low enough and management is investing in market share,” Katz observed.

Key Takeaways

• iGaming is experiencing robust growth compared to traditional casinos.
• BetMGM and Caesars Digital have reported promising recent performance.
• The Las Vegas Strip’s struggles contrast with the growth prospects of online gaming.
• Investor focus is shifting towards digital growth as operators enhance their online offerings.
• Success in the digital sector is increasingly tied to overall company performance.

In summary, while traditional casinos on the Vegas Strip are feeling the pinch of reduced visitation, the growth of iGaming is presenting new opportunities for operators willing to adapt. The challenge lies in balancing traditional operations with innovative digital strategies, ensuring stakeholders are focused on the right metrics moving forward.

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