Rush Street Interactive (NYSE:RSI) stock is poised to snap out of its post-merger slump and deliver upside for investors by way of its enviable technological capabilities.
Those are the sentiments of Jefferies analyst David Katz, who initiates coverage of the online casino operator with a “buy” and a price target of $21. That implies upside of roughly 50 percent from the April 15 close. That’s at the higher end of price forecasts on the newly public company.
Our positive view of RSI is driven by its unique attributes in the context of the broadly nascent digital market,” said Katz in a note to clients. “A pivotal Street debate is over the value of an owned/proprietary tech stack; we are convicted it provides strategic and economic benefit, as evidenced by proprietary product and profit.”
That’s welcome commentary for wary Rush Street Interactive investors. The iGaming operator has been a standalone publicly traded entity for less than four months following a merger with a special purpose acquisition company (SPAC), and the shares are struggling. Year-to-date, RSI stock is lower by almost 34 percent, and it resides 46.59 percent below its pre-merger highs.
For RSI Stock, Tech Is Difference Maker
As the internet casinos industry takes off in the US, investors and operators are seeing the value in vertical integration — a company’s ability to source back-end support and technology offerings from within, rather than relying on third-party vendors.
The model can allow for better margins and superior bottom line expansion. It’s also increasingly common in the online gaming and sports betting industries. In addition to Rush Street Interactive, Bally’s and DraftKings are notable examples of operators pursuing vertical integration.
“RSI is among the few US iGaming companies with a vertically integrated technology stack, where its proprietary back-end iGaming platform enables it to more quickly enter new states and customize wagering options and user experiences,” according to Singular Research.
Katz, the Jefferies analyst, sees advantages for RSI through land-based casinos via the company’s ties to Bet Rivers parent Rush Street, as well as social gaming providing “critical pre-market momentum.”
Strong iGaming Positioning
Sports betting is getting plenty of press, but industry insiders see online casinos as a real driving force of next generation gaming and Wall Street agrees.
Last month, Goldman Sachs said online casinos in the US today represent a $1.5 billion market. But that will surge to $14 billion in 2033, while delivering a compound annual growth rate (CAGR) of 27 percent for more than a decade.
Should those forecasts prove accurate, it could be a boon for RSI stock due to the operator’s enviable market share.
“RSI maintains a #1 market share position in the US iCasino industry and the #3 or #4 position in sports betting for most states,” according to Singular.
The research firm also views RSI as a potential takeover target for a European operator looking to gain a stronger foothold in the US market.