Rush Street Interactive Has Peru Potential

Posted on: July 21, 2022, 02:37h. 

Last updated on: July 21, 2022, 03:08h.

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

Peru recently legalized iGaming and online sports betting, joining five other Latin American countries in doing so. That move could have positive implications for some US-based gaming companies, including Rush Street Interactive (NYSE:RSI).

Rush Street Interactive
A Rush Street Interactive advertisement. An analyst is bullish on the company’s opportunity set in Peru. (Image: Twitter)

It’s estimated that online sports betting drives an annual handle of $1 billion in Peru, and with the government’s favorable 12% tax rate, it could be a compelling market for operators such as RSI.

RSI operates under the BetRivers and PlaySugarHouse brands, and is currently available with mobile or retail businesses in Colorado, Illinois, Indiana, Iowa, Michigan, New Jersey, New York, Pennsylvania, Virginia, and West Virginia. Following a minority investment in mobile games developer Boom Entertainment, which was announced last August, RSI gained access to Louisiana, Mississippi, and New Mexico.

As such, the investment community typically views RSI through the lens of the US marketplace. But analysts say the Latin America opportunity shouldn’t be ignored.

This (Peru) could represent a $30M+ net gaming revenue (NGR) opportunity for RSI, which already operates in Columbia and Mexico,” wrote Roth Capital analyst Edward Engel in a recent note. “Longer-term, we still believe LatAm offers a $3bn addressable market, which could yield RSI $120-240M in NGR if it asserts 5-10% market share. While investors generally overlook RSI’s LatAm exposure, we expect more interest as markets such as Brazil launch.”

He rates RSI stock a “buy” with an $8 price target, implying upside of 40% from the July 20 close.

Rush Street Interactive Embracing Latin America

News of Peru’s legalization of iGaming and sports wagering arrived about a week after RSI rolled out an online casino and sportsbook in Mexico, making it the first US-based gaming company in Latin America’s second-largest economy.

RSI was also the first US-based gaming company to launch a legal, regulated online sportsbook in Colombia, South America’s third-largest economy. RushBet.co, the company’s offering in Colombia, is already one of the dominant online gaming entities there. It’s estimated that RSI has 20% of the wagering market in that country, which Engel says the operator can duplicate in Peru if it’s first to market there.

Solidifying its Latin America footprint could pay dividends for RSI. While rivals in the US are engaged in costly customer acquisition battles, RSI is adding geographic diversity while likely not spending nearly as much to acquire customers in Latin America as it does in the US.

Colombia, Mexico, and Peru have a combined population of almost 214 million people, indicating it’s significantly expanding its total addressable market by entering those nations.

Other LatAm Opportunities

By establishing itself in the region, RSI could eventually tap into other markets there, including Argentina and Brazil — the latter of which is the crown jewel of Latin American gaming.

“Argentina is legalizing iGaming province-by-province, where its two largest provinces already legalized (covering 41% of the 46M population),” adds Roth’s Engel. “In Brazil, OSB/iGaming has also been legalized, but regulatory implementation has been slow. While an industry launch by YE2022 still seems feasible, we’d expect the market to mirror Canada/Ontario where gray market operators retain leading market share.”

The analyst also notes RSI shares are inexpensive relative to competitors, and that the operator has a penchant for outperforming market share expectations.