Caesars Stock Booted From S&P 500, Robinhood Gets the Nod
Following the announcement by S&P Dow Jones Indices that MarketAxess Holdings (NASDAQ: MKTX) and Enphase Energy (NASDAQ: ENPH), the casino operator, would be eliminated from the S&P 500, shares of Caesars Entertainment (NASDAQ: CZR) fell during Friday's after-hours session.
Caesars stock was unsurprisingly removed from the main domestic equity index after suffering a 29% year-to-date drop. Caesars' $5.36 billion market value as of today's US market close is about quadrupled by the $22 billion minimum market capitalization needed to be included in the S&P 500.
The S&P MidCap 400 Index will be "demoted" to the Harrah's operator. In March 2021, it and competitor Penn Entertainment (NASDAQ: PENN) joined the S&P 500. Penn left the gauge in September 2022, ending its brief tenure in the S&P 500. Now that Caesars has left the S&P 500, the only casino companies left are Wynn Resorts (NASDAQ: WYNN), MGM Resorts International (NYSE: MGM), and Las Vegas Sands (NYSE: LVS).
AppLovin (NASDAQ: APP), Emcor Group (NYSE: EME), and Robinhood Markets (NASDAQ: HOOD) have joined the benchmark. According to S&P, such additions and deletions take effect before US markets open on September 22.
A Few Connections to S&P Additions in Gaming
Despite being categorized as a financial services company, Robinhood has some connections to the gaming industry. Notably, Kalshi, the provider of the well-known investing mobile app, has partnered with prediction markets and recently declared that it will provide yes/no event contracts for the NFL and college football this season.
Given that many of their primary customers are gamblers, it is generally accepted in the investment and sports betting industries that businesses such as Crypto.com and Robinhood will keep expanding into different sports betting markets. But at the moment, these endeavors only make up a small portion of Robinhood's overall revenue mix.
Craig Billings, the CEO of Wynn, is on the board of directors of AppLovin, which has a tenuous connection to gambling. This, according to at least one analyst, is a plus for the S&P 500 addition.
“He’s (Billings)also on the board of AppLovin by the way, which makes me feel like AppLovin’s okay,” said CNBC’s Jim Cramer.
Is Flutter Up Next?
The index provider does not always swap out businesses from a certain industry with entrants from the same group when making changes to the S&P 500. Instead, the objective is to offer an index that accurately reflects the US equity market and economy as a whole.
Flutter Entertainment (NYSE: FLUT), the owner of FanDuel, is probably the next logical addition to the S&P 500 from the gaming industry. This is one of the reasons Caesars isn't being replaced by another gaming-focused company, but it's already a topic of much discussion in gaming investing circles.
With a market valuation of $51.38 billion, Flutter easily meets that criterion. Additionally, it meets or almost meets S&P's inclusion criteria for share-float, liquidity, and profitability.
