Rush Street Interactive Likely to Beat Q4 Estimates, Says Analyst

Posted on: February 28, 2022, 10:04h. 

Last updated on: February 28, 2022, 10:57h.

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

Rush Street Interactive (NYSE:RSI) is scheduled to deliver fourth-quarter results after the close of US markets on Wednesday, March 2. At least one analyst is optimistic about what the gaming company will tell investors.

Rush Street Interactive
Rush Street Interactive CEO Greg Carlin in a CNBC interview. An analyst says the company will beat fourth-quarter revenue estimates. (Image: CNBC)

In a new note to clients, Roth Capital analyst Edward Engel says the iGaming and online sportsbook operator is likely to beat sales estimates for the final three months of 2021. Analysts are expecting a loss of 12 cents a share on revenue of $136.07 million for the October through December period.

With 4Q market share only dipping slightly quarter-over-quarter, we see potential for 4Q net gaming revenue (NGR) to exceed both Street forecasts and the high-end of RSI’s guidance,” said Engel.

In midday trading, shares of RSI are higher by more than two percent on Engel’s call. The analyst reiterates a “buy” rating on the stock with a $17 price target, implying upside of nearly 70 percent from current levels.

RSI Likely to Echo Rivals

With gaming industry earnings season drawing to a close, at least one theme is becoming obvious. Operators with significant internet casino and sports wagering footprints aren’t likely to wring profits from those businesses until some point next year.

As Engel notes, that’s likely the case with Rush Street Interactive, too. The analyst believes RSI is on pace to post a 2022 earnings before interest, taxes, depreciation and amortization (EBITDA) loss of about $50 million, which would be inline with its 2021 EBITDA loss.

“FanDuel, BetMGM, Caesars and DraftKings have guided to positive EBITDA by 4Q23, and we expect RSI to echo similar expectations during 4Q results, and potentially targeting positive EBITDA in mid-2023,” said the analyst.

On the bright side for RSI investors, Engel says the operator can leverage unique seasonality and a stronger iGaming footprint to profitability than sports betting-focused rivals, such as DraftKings.

Takeover Speculation Fading

Last year, Rush Street Interactive was frequently rumored to be a takeover target, becoming the epicenter of speculation involving Fanatics and Walt Disney’s (NYSE:DIS) ESPN. However, no deal materialized, and RSI remains an independent company.

The takeover premium previously assigned to the stock is likely gone, as Churchill Downs (NASDAQ:CHND) explores options for its TwinSpires unit amid rumors that Wynn Resorts (NASDAQ:WYNN) could sell its WynnBet unit at a steep discount. With profitability concerns growing in the sports betting space, it could be a while before RSI is again the focus of takeover talk.

“While RSI offers greater market access, superior tech and a greater underlying foundation than these alternatives, take-out expectations have now been removed. We now believe Fanatics or ESPN are more likely to enter via M&A in 2023, during a period where incumbent leaders are targeting marketing rationalization,” concludes Engel.