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Why Eldorado Resorts Rose 13% in June

By Reuben Gregg Brewer – Updated Jul 6, 2020 at 10:51AM

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The casino operator's shares rose for a second month in a row as states started to reopen for business.

What happened

Shares of casino operator Eldorado Resorts (ERI) jumped 13% in June according to data from S&P Global Market Intelligence. Trading was fairly volatile throughout the month, but followed a very strong showing in May. Which is actually pretty important.

So what

Like so many other things in the world today, Eldorado Resorts' business has been impacted by COVID-19. Its casinos were shut down when the government was working to contain the spread of the coronavirus. When that effort started to gain traction, investors became more upbeat about the future and eventually Eldorado began the reopening process. Thus, May was a very good month for the casino operator. 

A hand lifting up cards on a poker table filled with chips

Image source: Getty Images.

June, however, brought a number of good news items and bad news items. For example, the company's resorts successfully continued the reopening process. Notably, customers appeared quite eager to get back to the gaming tables and slot machines, which is a good sign for the company's recovery prospects. However, COVID-19 cases started to pick up again, as well, suggesting that the economic reopening process will be, at best, slow and uneven. That's not so good for the company's prospects, since it is entirely possible that its casinos could get shut down again.

In June, the mood shifts on Wall Street were notable. Eldorado rose when investors were focused on positive COVID-19 information and fell when investors were focused on negative COVID-19 updates. Overall, the month ended with a 13% gain, but that wasn't the whole story. 

Now what

Operating casinos in the age of COVID-19 is not an easy thing to do. In an already cyclical industry, investors now have to factor in the unpredictable path of a pandemic. At this point, long-term investors looking at the casino space have to go in expecting the volatility to continue. Another month like May is highly unlikely until there's far more progress in containing the coronavirus. June's often sharp ups and downs are likely to be the norm. 

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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