Perfect Time To Bet The Farm On Vegas Stock?

Five years ago, the stock we are about to discuss was trading pretty much where it sits today. Between then and now, though, it’s plunged in value by 75% during the COVID era, and rallied 10x from those lows before losing about 75% again to trade close to where it’s at today.

With all that volatility, you might think this is some penny stock we are about to discuss but in fact it’s the well-known Caesar’s Entertainment, a Vegas casino company that has grown revenues by almost 5x since it was trading at these same levels in 2019.

Yet there’s something else about this stock that most investors probably don’t know right now, and is key to an investment thesis. We reveal all below.

Key Points

• Caesar’s Entertainment has been a highly volatile stock over the past five years while revenues have soared.
• The share price currently trades at approximately the same level as it did 5 years ago.
• A strong seasonal trend takes over at this time of year, and it could prove to be a strong tailwind for Ceasar’s.

Strange Force Powers Caesar’s Now

While snowbirds in Florida enjoy the heat during the Winter and Spring months, much of the rest of the country is locked down shoveling snow and trying to stay warm. But when the first signs of summer emerge, vacation planning begins and with it an influx of visitors to Sin City. It’s the anticipation of higher foot traffic and increased spending in Las Vegas that often powers casino stocks higher, starting right about now.

Indeed Caesar’s Entertainment has a remarkable track record of rising at this time of year. In 8 of the past 9 years it has climbed by as much as 32%, on average, over the next 11 weeks, a remarkable history of outperformance relative to the market.

Of course, no forecasting tool is perfect and seasonal trends aren’t a slam dunk either but it is noteworthy that only in 2022, a down year in the markets did Caesar’s bullish seasonal trend get interrupted.

History may not repeat but if it rhymes, this entertainment giant has the potential to produce extraordinary returns for investors at a time when the market historically has a substantially less bullish track record of just 3%.

How High Can Ceasar’s Go?

If the past years bullishness repeats this year, Caesar’s Entertainment share price has the potential to rise from the low $40 range all the way to the low to mid-$50s.

For stock investors, the opportunity is large but for call option buyers it perhaps offers an even better reward to risk opportunity. Should the market start to tumble, the downside will be muted in dollar terms but the percentage upside is substantially larger. Given the historic trend has materialized over about a 3 month period, the options would likely need to be purchased with at least 6 months of time value to avoid the worst effects of time-decay.