Caesars Entertainment (NASDAQ: CZR) is exploring options to maximize value from its digital operations, including Caesars Sportsbook, as analysts suggest the market currently undervalues this segment of the business.

Deutsche Bank analyst Carlo Santarelli estimates Caesars' digital unit could be worth up to $20.75 per share, based on projected 2025 revenue of $352 million and a 12.5x EBITDA multiple. This valuation, approximately $4.4 billion, stands in stark contrast to the company's current stock price of $32.51, suggesting significant untapped value.

The digital division has recently improved its performance by reducing losses and moving toward profitability. However, market participants appear to be applying a substantial discount to both the digital operations and the company's brick-and-mortar assets, particularly considering that over half of the core business EBITDAR comes from wholly-owned properties.

Potential strategies to unlock this value could include a spinoff of the digital unit, which would allow Caesars to retain partial ownership while generating significant capital. This option appears more likely than an outright sale, as current market share and limited iGaming legislation might deter potential buyers.

The discussion around Caesars' digital operations has persisted for over four years, with management expressing openness to various strategic options while also showing interest in maintaining full ownership. Any decision will need to balance immediate value creation with long-term strategic benefits, particularly considering the high-margin potential of iGaming as more states potentially legalize online gambling.

This strategic consideration comes at a time when the gaming industry continues to evolve, with digital operations becoming increasingly important to traditional casino operators' overall business models.

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