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Why Caesars Entertainment's Shares Popped 12.3% on Monday

What happened

Shares of gambling giant Caesars Entertainment (NASDAQ: CZR) jumped as much as 12.3% in trading Monday after announcing a big new partnership. The stock bounced mid-day and is still up 9% in trading at 3:05 p.m. EDT.

So what

Disney (NYSE: DIS) owned ESPN announced that it has entered into separate multi-year agreements with Caesars and DraftKings (NASDAQ: DKNG) to integrate with their digital platforms. Caesars' partner William Hill will have its data featured on ESPN's platforms and integration to its sportsbooks with Caesars' at both physical locations and mobile-betting apps.

Image source: Getty Images.

The goal of this deal is to drive more traffic to Caesars' sportsbooks across the country, whether they're mobile apps or not. And the upside is that when people are watching sports and highlights, they're likely to see the Caesars name, which is great advertising for the platforms. Given how hot sports betting and mobile sports betting, in particular, are right now, it's no surprise that this announcement caused Caesars' stock to pop.

Now what

This agreement isn't going to fundamentally change Caesars' business immediately, but it could be notable long term. Companies are jockeying for position in the mobile sports-betting industry that could be worth billions of dollars as betting opens up across the country. For a highly leveraged company like Caesars, that's a welcome growth opportunity in a low capital-investment business.

As much as I like the agreement, today's pop probably won't last because it'll be years before we see fruit from mobile betting for Caesars. But investors think it's a big deal today, and that's why shares are moving higher.

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Travis Hoium owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short October 2020 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.


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