Rush Street Interactive Rallies on Upped Guidance, Buyback Plan

Posted on: October 30, 2024, 05:37h. 

Last updated on: October 31, 2024, 10:15h.

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

Shares of Rush Street Interactive (NYSE: RSI) surged in Wednesday’s after-hours trading session after the gaming company boosted its 2024 earnings guidance while announcing a $50 million share buyback plan.

Rush Street Interactive
The Rush Street Interactive corporate logo. The company upped its 2024 earnings and revenue guidance and announced a $50 million share repurchase plan. (Image: Rush Street Interactive)

In conjunction with the release of its third-quarter results, the BetRivers parent said it now expects 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) of $82 million to $86 million. That’s well above the guidance the company issued earlier this year.

RSI expects Adjusted EBITDA for the full year ending December 31, 2024 to be between $82 and $86 million, increasing the midpoint by $16 million compared to the prior guidance. At the midpoint of the range, Adjusted EBITDA of $84 million compares to $8.2 million of Adjusted EBITDA for 2023,” according to a statement issued by the online sportsbook operator.

The Chicago-based gaming company also lifted its top-line forecast, saying it now expects annual revenue of $900 and $920 million. The midpoint of that range — $910 million — is $30 million above prior guidance and implies year-over-year growth of 32%.

Rush Street Interactive Joins Gaming Buyback Party

Share repurchases are increasingly common in the gaming industry and Rush Street Interactive is getting in on the act, telling investors its board of directors recently approved a $50 million buyback plan.

While companies aren’t obligated to fulfill any — or all of any announced buyback schemes — should RSI repurchase $50 million of its stock, it represents a healthy percentage of its market capitalization of $2.39 billion. That buying activity could also make short sellers uncomfortable — a relevant point because short interest in the gaming stock is 5.09%, according to Seeking Alpha data.

News of the buyback arrived with RSI sporting a year-to-date gain of 139.64%, which is easily one of the best showings among all gaming stocks.

“This move reflects our confidence in the company’s future and our commitment to enhancing shareholder value. Our cash generation and strong balance sheet provides us with the option to make this strategic investment,” said CEO Richard Schwartz in the press release.

Latin America a Growth Driver for RSI

Investors embracing iGaming and sports wagering stocks such as RSI typically focus on those operators’ US footprints and, to a lesser extent, Ontario, Canada. Latin America is largely overlooked because the bulk of the US-listed gaming equities don’t have exposure to that region.

RSI does and it’s an increasingly prominent though underappreciated part of the broader investment thesis. Third-quarter data confirm as much.

During that period, RSI’s monthly active users (MAUs) in Latin America, including the operator’s Mexico footprint, surged 122%. Average revenue per monthly active user (ARPMAU) in that region declined to $39 from $43, but that was buffered by the volume increase.