Caesars Entertainment Is A Blue-Chip Stock Heading Into 2021

Posted By Nicholaus Garcia on November 25, 2020 - Last Updated on December 28, 2020

It’s the largest casino operator in the US. It operates 55 casinos, including eight on the Las Vegas Strip. It employs roughly 64,000 people and is worth upward of $13 billion.

Of course, I’m talking about the global powerhouse that is Caesars Entertainment.

As we close out 2020, let’s take one last look at Caesars ($CZR) — which opened Nov. 24 at $68 — and try to decipher what experts are saying about the company’s stock.

The sports betting elephant in the room

We know Caesars has been and will continue to be a force in the casino sector. Its portfolio (53 properties) vastly outnumbers everyone else’s. But while it does have great name recognition, that name doesn’t carry the same weight on the sports betting side of things.

One could argue that some of the most well-known sports betting operators right now are DraftKings, FanDuel, Barstool Sports (Penn National) and William Hill.

So in order to compete with the top operators, Caesars went out and did what the company does best — it spent money.

Flexing its muscle, the company agreed to buy British-based William Hill for $3.7 billion, and like that, Caesars closed the gap and became one of the blue-chip sports betting operators.

But what does this play mean from an investor perspective? It means the ship has never looked stronger.

A growing online gaming sector

Investors are in love with the online gambling sector. Ever since DraftKings became a publicly traded company, deep-pocketed moguls have been dumping money into companies like Penn National (Barstool Sportsbook) and Flutter Entertainment (FanDuel Sportsbook).

The future is the ability to gamble from your mobile device, whether that’s sports betting, online poker or online casino games. How lucrative this gaming sector may be is still up in the air. Sports betting around the US is only a few years old, and only a handful of states have online poker and online casino games. But investors are betting, and betting big, that this niche section of gambling can skyrocket into big returns.

Now that Caesars has its mitts on a part of this online explosion, it will only help to strengthen its extensive portfolio.

More states, more opportunity, more money for Caesars

What’s better than operating casinos in 16 different states? Answer: operating casinos in 22 different states. An even better answer would be operating casinos in all 50 states.

Following the Election Day madness, a pair of delicious opportunities emerged on the sports betting and retail casino side of things for CZR.

The first came by way of Virginia, where voters approved a full-scale casino expansion. This once conservative antigambling state has embraced gaming to the max.

Caesars plans to build a new $400 million gaming venue in the city of Danville, complete with 1,300 permanent jobs and a minimum of $9 million in tax revenue. And as we already know, the two things that make politicians salivate the most are jobs and tax revenue. A new state, check.

The second was the parish-by-parish approval of Louisiana sports betting. Caesars operates three properties in the Bayou State, the major attraction being Harrah’s New Orleans. Toss in a William Hill Sportsbook and get ready for college football zealots to come running. More sports betting opportunities, check.

Experts predict that the more states embrace sports betting and online gambling, the better a casino stock will perform. The two are not mutually exclusive, and one does not directly impact the other. But one can make an educated observation and conclude that the more states you operate in, the more sports betting opportunities you have and the more money you accumulate. More money, check.

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Looking into 2021 and beyond

On the casino side of things, there’s Caesars, then 50 feet of space and then everyone else. The company is set. It is the biggest and baddest company in the US.

But on the sports betting side of things, there is a little work to be done. The acquisition of William Hill should go a long way to closing that gap and help the company benefit from the $6.2 billion US sports betting revenue opportunity.

However, when Eldorado acquired Caesars, its debt levels rose. Caesars is a casino-forward operation. and increased debt could make things tricky. There is also the unknown when it comes to the coronavirus pandemic. As the holiday season approaches, governors are already closing casino doors to help calm the spread of the virus. This will no doubt impact profits for a company like Caesars that relies heavily on travel and tourism.

The thing about blue-chip basketball programs is they always find a way to reload for the following season. With the acquisition of William Hill, future opportunities in Louisiana and Virginia, and the embrace of online gambling, Caesars has done just that, reloaded for a big year in 2021.

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Nicholaus Garcia

Nick has had stints in Chicago and Washington, D.C., writing about politics, financial markets, and sports betting. He graduated from Texas Tech University and completed his master's degree in journalism at Columbia College Chicago.

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