As anticipated, the second-quarter financial reports from MGM Resorts International (NYSE: MGM) and Caesars Entertainment (NASDAQ: CZR) reaffirmed the downturn on the Las Vegas market while indicating more of the same for the current quarter.  For iGaming, the image is noticeably brighter.

According to analyst David Katz of Jefferies, operators are faced with a dilemma when trying to please the investing community through digital growth: unless the overall firm is doing well, market participants aren't giving interactive advances much praise.

"Near-term concerns about Las Vegas Strip weakness and, in the case of CZR, regional negative productivity, are offsetting digital acceleration,” wrote the analyst in a Monday note to clients. “If estimates are finally low enough in land-based ops, digital can capture credit, in our view.”

Since MGM and Caesars are the two biggest operators on the Las Vegas Strip, a gaming industry that is now having trouble due to poor visitor numbers, persuading investors to focus more on digital growth may prove to be a difficult task in the near future.

Growing Indications of the Acceleration of iGaming

There is no doubting that there are encouraging signs regarding iGaming.  Caesars reported that its interactive division had one of its strongest quarters to record, and BetMGM and Rush Street Interactive (NYSE: RSI) only last week raised their 2025 projections.

Only Rush Street Interactive, out of the three, is solely focused on online casinos and sports betting, supporting the idea that investors might not be giving Caesars and MGM's digital operations enough credit because land-based casinos continue to be the companies' main source of revenue.

Since MGM only owns half of BetMGM and UK-based Entain owns the other 50%, the situation is arguably worse with MGM.  Executives and a few investors have long maintained that Caesars' internet business's strength isn't sufficiently represented in the share price, to the point that there is persistent conjecture that the operator may spin off that division in order to increase shareholder value.

Katz pointed out that although BetMGM and MGM China's second-quarter earnings were impressive, the parent company doesn't own all of those businesses, so those elements weren't sufficient to counteract Las Vegas's decline.  Nearly 56% of the Macau entity is under its control.

Caesars Digital Is Developing in the Correct Way

According to Katz, Caesars Digital is on the right track and is getting close to a $500 million yearly profits before interest, taxes, depreciation, and amortization (EBITDA) run-rate.  To get investors to focus more on the online aspect of the firm, the operator most likely has to report greater land-based outcomes.

This was evident in the second quarter, when the operator's Las Vegas and regional units' downturn eclipsed the digital segment's strength.

“CZR has the assets to lead, but needs to execute better. We agree with the consensus view that near-term estimates are finally low enough and management is investing in market share,” observes Katz.