Please ensure Javascript is enabled for purposes of website accessibility

Why Caesars Entertainment Stock Jumped 22% in September

By Reuben Gregg Brewer – Oct 6, 2020 at 11:40AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares were on fire in September as the casino operator continued to bounce back from steep losses earlier in the year.

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. 

Reuben Gregg Brewer owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Caesars Entertainment Stock Quote
Caesars Entertainment
CZR
Walt Disney Stock Quote
Walt Disney
DIS
$95.37 (-0.33%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
351%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.