Proprietary Platform And iCasino Legislation Will Shape Engagement

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AnalystConsensusTarget
Consensus Narrative from 8 Analysts
Published
26 Apr 25
Updated
17 Jul 25
AnalystConsensusTarget's Fair Value
US$29.03
49.6% undervalued intrinsic discount
17 Jul
US$14.64
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1Y
39.7%
7D
-0.7%

Author's Valuation

US$29.0

49.6% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Last Update01 May 25
Fair value Increased 79%

AnalystConsensusTarget has decreased profit margin from 7.3% to 6.4%, increased future PE multiple from 54.6x to 62.7x and increased shares outstanding growth rate from 0.1% to 0.2%.

Key Takeaways

  • Leveraging a proprietary tech platform and customer-centric strategies is key to boosting user engagement and driving revenue growth through innovative features and real-time rewards.
  • Strategic marketing focus and monitoring legalization opportunities are crucial for maximizing revenue potential and improving net margins through efficient market spend and new market entries.
  • Regulatory and tax challenges, along with economic and marketing pressures, could hinder Rush Street Interactive's revenue growth and profitability.

Catalysts

About Rush Street Interactive
    Operates as an online casino and sports betting company in the United States, Canada, and Latin America.
What are the underlying business or industry changes driving this perspective?
  • Rush Street Interactive plans to continue leveraging its proprietary technology platform, which supports diverse and innovative product features, to stay ahead of the market and drive user engagement, leading to increased revenue and potential margin improvements.
  • The company is actively monitoring legislation in several U.S. states and Canadian provinces for potential iCasino legalization, which could provide significant upside in their revenue projections if realized.
  • RSI's focus on customer-centric experiences, including a unique real-time rewards system, aims to enhance player retention and engagement, contributing to higher ARPMAU and long-term revenue growth.
  • The company is strategically refining its marketing spend, focusing on markets with high return potential, which is expected to improve marketing efficiency and drive net margin improvements through greater leverage over marketing expenses.
  • RSI anticipates continued high growth in emerging markets like Latin America, where they experienced significant MAU increases, contributing to overall revenue growth and potentially higher overall earnings due to improved scale.

Rush Street Interactive Earnings and Revenue Growth

Rush Street Interactive Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Rush Street Interactive's revenue will grow by 13.8% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 0.3% today to 6.4% in 3 years time.
  • Analysts expect earnings to reach $87.8 million (and earnings per share of $0.44) by about May 2028, up from $2.4 million today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 62.7x on those 2028 earnings, down from 491.1x today. This future PE is greater than the current PE for the US Hospitality industry at 22.6x.
  • Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 7.57%, as per the Simply Wall St company report.

Rush Street Interactive Future Earnings Per Share Growth

Rush Street Interactive Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The introduction of a new tax on player deposits in Colombia could negatively impact revenue growth and adjusted EBITDA, as the company may face challenges in fully passing the cost onto customers.
  • Any changes in taxation policies, like the suggested VAT tax in New Jersey or other states, could increase the effective tax rate on gaming revenues, impacting net margins and profitability.
  • Potential regulatory challenges associated with the online casino and sports betting industry, especially if proposed tax increases or tighter regulations are enacted, could affect overall earnings.
  • Continued high marketing expenditures, while showing improved efficiency, could limit net margin improvements if revenue growth does not sufficiently outpace these expenses.
  • Exposure to currency fluctuations and economic instability in non-U.S. markets, as mentioned regarding potential currency movements, might affect overall earnings and cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $15.857 for Rush Street Interactive based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $14.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $87.8 million, and it would be trading on a PE ratio of 62.7x, assuming you use a discount rate of 7.6%.
  • Given the current share price of $12.36, the analyst price target of $15.86 is 22.1% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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