Casino Stocks Lead S&P 500 Returns This Week

It was an excellent week for stocks as the S&P 500 rose 3.45%, but Caesars Entertainment (NASDAQ: CZR) far exceeded the broader market in the last week of March, soaring 15.12%.

Guests entering Caesars Palace Las Vegas. The operator was the top-performing stock in the S&P 500 this week. (Image: David Paul Morris/Bloomberg)

That surge was helped by a 4.14% surge today, although it took place on low-than-average trading volume. Still, the Harrah’s operator was the most successful member of the S&P 500 in the closing week of the initial quarter, concluding the first three months of 2023 with a quarterly gain of 17.78%. Caesars, which is one of four casino operators included in the benchmark domestic equity index, was the only member of that quartet among the index’s top-performing names this week.

It has been approximately two years since Caesars joined the S&P 500. The stock is up over 17% year-to-date and with its close today at $48.81, the stock offers potential upside of 44.38% compared to the Wall Street consensus price target of $70.47.

Caesars Big Week Came Without News

What makes Caesars’ massive rally this week even more intriguing and, potentially, encouraging, is that it was accomplished without any company-specific news.

The Nevada-based casino operator issued no major announcements this week. It didn’t say it was selling property to generate revenue nor did it introduce debt-reduction schemes — two key issues in the eyes of analysts. Nor did Caesars offer a preliminary view of its first-quarter results. It appears analyst commentary was one factor before the stock’s bullish movement this week.

Also, CZR and MGM mentioned on their 4Q calls that Strip occupancy has been above 90% in 2023, with group business now surpassing 2019 levels for the first time, which, combined with a solid leisure events schedule, sets operators up for record hotel revenue in the month,” composed Macquarie analyst Chad Beynon in a report to customers.

MGM Resorts International (NYSE: MGM) and Caesars are the leading Strip operators. In more good news for Caesars, Beynon noted first-quarter Las Vegas visitation was merely 3% below pre-coronavirus levels, compared to the six-month average of -5%. MGM and Caesars combine for nearly 60% of Strip gross gaming revenue (GGR).

Another Accolade for Caesars

In what could be a sign of resilience in Caesars shares, the stock’s remarkable weekly performance happened in the face of some hard macroeconomic news. In its March Consumer Confidence survey, the Conference Board noted betting and lotteries are the categories in which consumers are planning the largest spending decreases over the next six months.

A different set of data from a research firm suggest leisure travelers are actively reducing spending on amenities such as dining, night clubs and pools — all of which are relevant to Las Vegas casino operators, including Caesars.

Near-term catalysts for Caesars stock include the possibility of a better-than-expected first-quarter earnings report and the potential for a shorter timeline to profitability in the iGaming/online sportsbook unit.