Caesars digital betting business hits a milestone, sending sportsbook shares higher

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Sportsbook shares rose on Tuesday after Caesars Entertainment Inc. management announced that an earnings measure at its digital betting business turned positive last month, giving the company an opportunity to contribute to profits in the coming months.

Casesar’s CZR,
+1.51%
Chief Executive Tom Reeg said in a conference call on Tuesday that the digital business, which includes online sports betting, reported positive Ebitda — or earnings before interest, taxes, depreciation and amortization — in October. The push into this measure of profitability came 12 months ahead of schedule, he said.

Whether that translates into the company posting adjusted earnings in the fourth quarter depends on the fate of the Houston Astros in the World Series and how much Casesars may have to pay out. The casino operator could pay $30 million, possibly the largest payment ever made in the US to a single bettor, should the Astros prevail against the Philadelphia Phillies, according to the Associated Press.

“I think most of you know that we have a pretty high-profile signing with Astros, so that’s going to be a determining factor as to whether the fourth quarter is positive overall,” Reeg said on the earnings call. “But we expect that we’ve flexed and will contribute digitally as we move forward.”

He said the digital business has a “really good chance” of making an early “contribution” to full-year Ebitda next year.

Caesars shares surged 5.9% and other online gambling companies joined in the fun. DraftKings Inc. DKNG,
+4.11%,
the online sports betting platform, was up 6%, while MGM Resorts International MGM,
+1.04%
increased by 1.5%.

The comments came after Caesars’ third-quarter results exceed expectations as the company returned to profitability, helped by sales from online sportsbooks — a segment the company has been aggressively promoting in recent months. Strong results in Las Vegas and its gaming and hotel segments boosted results overall.

Ceasars reported the findings as Wall Street tries to gauge consumer appetites for travel and gambling as higher prices threaten to cut spending. But Reeg said October was “the strongest month in Las Vegas history for Caesars.” And he said regular seasonal business trends have returned to the city.

Casears’ stock is down 52% so far this year. In comparison, the S&P 500 Index SPX,
-0.41%
has fallen by 19% during this period.

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