Caesars Entertainment Q2 Earnings Miss Estimates, Goldman Sachs Lowers Price Target to $34

Goldman Sachs has reduced its price target for Caesars Entertainment (CZR) to $34 from $36 and maintained a Buy rating after the company's Q2 earnings report showed a shortfall in EBITDAR for both its Regional and Las Vegas sectors. Despite this, the Digital segment emerged as a positive contributor, alleviating pressure from weaker segments. Caesars Entertainment operates in the Travel & Leisure industry with a diverse portfolio of domestic gaming properties and digital assets. The company's financial health is a concern, with negative net margin and low earnings per share. However, its digital segment has shown promise in offsetting weaknesses in other areas.

Caesars Entertainment Corporation (CZR) reported its second-quarter (Q2) 2025 earnings, revealing a significant miss in earnings per share (EPS) but a slight beat in revenue. The company posted an EPS of -$0.39, falling short of the forecasted $0.06, marking a surprise of -750%. Despite this, Caesars managed to surpass revenue expectations with $2.91 billion against a forecast of $2.86 billion. The stock reacted negatively, dropping 3.33% to $29.08 in aftermarket trading.

Key Takeaways:
- Caesars reported a significant EPS miss, with a -750% surprise.
- Revenue exceeded expectations, reaching $2.91 billion.
- Stock declined 3.33% in aftermarket trading.

Company Performance:
Caesars Entertainment’s performance in Q2 2025 was mixed. While the company experienced a notable shortfall in EPS, it achieved a revenue beat, driven by strong performance in its digital segment. The digital unit delivered its best quarter ever, contributing $80 million in adjusted EBITDA. However, the Las Vegas segment faced challenges due to softer leisure demand and compressed booking windows.

Financial Highlights:
- Revenue: $2.91 billion, a slight increase from the forecast.
- EPS: -$0.39, significantly below the expected $0.06.
- Adjusted EBITDAR: $955 million, with notable contributions from the digital and regional segments.
- Digital net revenues: $343 million, up 24% year-over-year.

Market Reaction:
Following the earnings release, Caesars’ stock fell 3.33% in aftermarket trading, closing at $29.08. This decline reflects investor concerns over the substantial EPS miss, despite the revenue beat. The stock’s movement places it closer to its 52-week low of $21.40, indicating market apprehension.

Outlook & Guidance:
Looking ahead, Caesars anticipates a positive performance in Q4, expecting year-over-year growth. The company is targeting $500 million in digital EBITDA by 2026 and is considering the potential separation of its digital business. Strong group business is anticipated in Las Vegas for Q4 2025 through Q2 2026.

Executive Commentary:
CEO Tom Reeg highlighted the company’s digital momentum, stating, "We’re well on our way to that $500 million [digital EBITDA] target." He also noted the extraordinary growth in the digital segment, emphasizing its importance to Caesars’ overall strategy.

Risks and Challenges:
Continued softness in the Las Vegas leisure market could impact future earnings. Compressed booking windows may lead to revenue volatility. Potential challenges in managing union contract increases in Las Vegas. The international business, particularly in Canada, remains weaker than expected. Increased promotional spending and marketing investments may pressure margins.

Goldman Sachs Update:
Following Caesars' Q2 earnings report, Goldman Sachs has reduced its price target for Caesars Entertainment (CZR) to $34 from $36 and maintained a Buy rating. Despite the shortfall in EBITDAR for both its Regional and Las Vegas sectors, the Digital segment emerged as a positive contributor, alleviating pressure from weaker segments. Caesars Entertainment operates in the Travel & Leisure industry with a diverse portfolio of domestic gaming properties and digital assets. The company's financial health is a concern, with negative net margin and low earnings per share. However, its digital segment has shown promise in offsetting weaknesses in other areas.

References:
[1] https://www.investing.com/news/transcripts/earnings-call-transcript-caesars-q2-2025-misses-eps-revenue-beats-93CH-4158712