Rush Street Interactive Becomes Wall Street Fave, Analyst Sees Second-Half Revenue Surge

Posted on: March 23, 2021, 11:25h. 

Last updated on: March 23, 2021, 12:42h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Rush Street Interactive (NYSE:RSI) is not even three months removed from becoming a publicly traded company. But it’s quickly becoming a hit among some Wall Street analysts.

RSI stock
The New York Stock Exchange where Rush Street Interactive trades. Analysts are bullish on the stock. (Image: USA Today)

Shares of the online casino and sportsbook operator are slumping — down seven percent over the past month — but that decline could give way to upside if analyst prognostications prove accurate. That could be the case if internet casinos take off in the manner which market observers expect.

The key takeaway from our management meetings is that RSI is sustaining meaningful share in US iGaming at favorable unit economics,” said Oppenheimer analyst Jed Kelly in a note to clients.

Earlier this month, RSI lifted its 2021 guidance due in large part to impressive real-money monthly active users (MAUs) and average revenue per MAU (ARPMAU) trends in its iGaming unit.

Kelly has an “outperform” rating on RSI stock with a $25 price target. That implies upside of 44.5 percent from where the shares currently reside.

RSI Stock Play on Online Casino Boom

In the new breed of gaming equities, those with sports wagering exposure are capturing more attention. But online casino operators are expected to deliver significant growth, too. Many of the relevant companies, including Rush Street Interactive, have footprints in both spaces.

For its part, the Chicago-based appears more enthusiastic about the economics regarding iGaming. That’s relevant at a time of bullish forecasts for internet casinos. RSI rival DraftKings (NASDAQ:DKNG) recently said the US internet casino market could eventually be worth $40 billion, assuming full legalization. Goldman Sachs forecast 27 percent compound annual growth (CAGR) over the next decade for US iGaming.

Speaking of Goldman, analyst Stephen Grambling today raised his price projection on RSI stock to $25 from $23, citing rapid growth in the domestic online casino and sports wagering markets. He has a “neutral” grade on the stock.

Big Second-Half Potential

The company is live with iGaming or sports betting in 10 markets — nine US states and the District of Colombia. However, that roster could expand in the second half of this year, potentially providing tailwinds for RSI stock.

Kelly, the Oppenheimer analyst, says RSI’s in-house technology group is working on new products, including iOS app launches in Michigan, New Jersey, and Pennsylvania. In those two states, the company already generates more than double the amount of revenue from internet casinos than it does from online sportsbooks.

Kelly adds that another catalyst for Rush Street Interactive would be Illinois signing off on iGaming because the company could rapidly gain significant market share there because of its relationship with Rivers Casino. The state is already one of the most vibrant sports betting markets in the country, and with a need for more revenue, approving online casinos could be next in its quest to shore up state coffers.