What happened

Shares of casino operator Caesars Entertainment (CZR) rose an impressive 22% in September according to data from S&P Global Market Intelligence. That added to an incredible multi-month run. Down nearly 90% at one point during the early 2020 bear market, at the end of last month the stock was off by just 6% over the first three quarters of the year. That's an astounding and rapid rebound.

So what

The early-year drop in the shares of Caesars Entertainment makes complete sense, given that the company's casinos were shut at the start of the coronavirus pandemic. However, as restrictions have eased, its operations have begun to work back to normal. The outlook for the company has been improving as that process continues.

A gambling table with dice and chips on it

Image source: Getty Images

That said, September was an active month for Caesars, which merged with peer Eldorado Resorts in July. It agreed to sell a property (which will net the company roughly $16.5 million) and took out a $400 million loan. Both moves will provide cash for the company's growth efforts. And on the growth front, the company inked a sports betting deal with Walt Disney's ESPN and, at the end of the month, agreed to buy out its sports betting partner William Hill for around $3.8 billion. Sports betting is a relatively new market and investors appear pleased that Caesars is quickly working to be a leader in the space. All in, the upbeat view of Caesars stock is tied to its business recovery and, perhaps just as important, its efforts to expand into the sports betting space.   

Now what

The quick recovery in Caesars shares is notable, but long-term investors should probably be a little cautious here. Gambling is a highly cyclical business and after such a swift rebound, there's likely a lot of good news priced into the stock at current levels. If the economy should remain weak or, worse, if COVID-19 cases start to pick up again, Caesars could face renewed headwinds and a return of negative investor sentiment. Good things are taking shape at this casino operator, but there's still a lot to worry about over the near term.