Shares in casino stocks are soaring today, after news from drug companies Pfizer and BioNTech this morning that a COVID-19 vaccine candidate is showing 90% effectiveness.
Shares of Wynn Resorts (NASDAQ:WYNN) are up 25% as of 10:55 a.m. EST, while MGM Resorts (NYSE:MGM) and Caesars Entertainment (NASDAQ:CZR) shares are up 14% and 11%, respectively. The outsize jump in Wynn likely corresponds to the fact that its shares remain down the most of the group since the start of 2020.
The drug companies reported the vaccine results based on a late-stage clinical trial. The 90% efficacy level is far above what some experts have said is acceptable. White House coronavirus task force advisor Dr. Anthony Fauci has previously said that he would find a vaccine acceptable with efficacy rates as low as 50% or 60%.
As a comparison, the Centers for Disease Control and Prevention (CDC) says that influenza vaccines lower the risk of flu illness by between 40% and 60% among the overall population. The measles vaccine has an approximately 93% rate of effectiveness.
Investors are cheering the news for travel and leisure companies like the casinos, which have been severely impacted by the pandemic spread.
Even with today's reaction to the vaccine news, the casino stocks are still largely underperforming the rest of the market in 2020. Wynn shares are still down almost 30% for the year, after the company reported a larger-than-expected third-quarter loss last week.
Though Wynn CEO Matt Maddox said in the release he was "encouraged by the progress we have made in each of our properties over the past several months," the company still reported operating revenue was down 77.5% compared with the prior-year period.
One of the reasons Wynn shares lag its peers is because it is more heavily reliant on just its properties in Las Vegas and Macau. Both MGM and Caesars have been pursuing online gambling and sports betting strategies. On the flip side, an effective COVID-19 vaccine more positively affects the physical casino locations, which explains today's outsize gains for Wynn. Investors see it as the better value pick at this point, if a vaccine helps the casinos get back to prepandemic levels of visitors.
All casinos will prosper from a successful vaccine. Today's news was welcome, but it will still be several months before a vaccine is approved and distributed in sufficient quantities.
Since the start of 2020, MGM has launched its BetMGM app, while Caesars has merged with Eldorado Resorts and announced plans to acquire U.K.-based William Hill. These moves will likely help these casino companies grow faster in the long run, but today's news is all about a COVID-19 vaccine, and it's positive news for the entire sector.