What happened

Shares of casino operator MGM Resorts International (MGM 0.31%) rocketed a dramatic 37% higher in November, according to data from S&P Global Market Intelligence. Following close behind was peer Penn National Gaming (PENN -4.65%), whose stock rose just shy of 30% in the month. However, the gains weren't confined to casino companies, with key industry supplier Scientific Games (LNW 3.21%) also gaining about 17%. As with so many things in 2020, the story here is tied to the coronavirus pandemic.

So what

Early in 2020, governments around the world used broad economic shutdowns to help slow the spread of the coronavirus. Any business deemed nonessential was forced to close its doors. It would be difficult to describe gambling as essential, so MGM Resorts and Penn National Gaming both had to suffer through a period in which they, basically, had little to no revenue coming in from their physical operations. Investors sold the stocks, which makes sense. The negative sentiment carried over to industry suppliers like Scientific Games, which makes gambling machines.

A spinning roulette wheel

Image source: Getty Images.

Adding to the problem is that casinos are purpose-built to bring large numbers of people into close proximity with one another. That is the type of environment within which the coronavirus can easily spread. Indeed, even though casinos have begun to reopen, they are operating under reduced occupancy and have heightened cleaning regimes. Customers, meanwhile, have been cautious about returning, worried about the risk of congregating with others. The situation is not good for physical casinos.

That said, since the early 2020 declines, all three of these stocks have recovered nicely. Penn National Gaming, in fact, was up nearly 140% through the first 11 months of the year. Scientific Games advanced just shy of 40% over that span. And MGM Resorts, while down 15%, is well off its lows for the year -- at one point it was down by around 80%. Penn National's impressive run has largely been driven by its push into online gaming and sports betting. The story is similar at Scientific Games, which has stated that it will increasingly focus on those two areas. MGM Resorts' recovery, though not as impressive, has also been helped along by a move into digital gaming

MGM Chart

MGM data by YCharts

And then in November, Pfizer and BioNTech, Moderna, and AstraZeneca all announced that they had achieved material success in developing coronavirus vaccines. Investors, seeing a light at the end of the pandemic tunnel, bid up the shares of the casino operators, like MGM Resorts and Penn National, and industry suppliers, like Scientific Games. Basically, an effective and widely available vaccine should allow the physical gambling business to return to some semblance of normal. That suggests that these companies could soon have the benefit of their online gaming platforms and a return of revenue from their legacy businesses. No wonder the stocks rose so much so fast.

Now what

That logic isn't faulty per se, but it doesn't take into account time. It will be months if not quarters before a vaccine is likely to have a material impact on the trajectory of the coronavirus. Meanwhile, the world is dealing with a material uptick in COVID-19 cases right now. Wall Street tends to be forward-looking, but the truth is it could be quite some time before MGM Resorts, Penn National Gaming, and Scientific Games see anything close to normal in their casino-related businesses, and a lot of good news appears to have already been priced in at this point. Long-term investors should probably take the November gains with a grain of salt.