UPDATE: Jefferies Starts Rush Street Interactive (RSI) at Buy, Internally Developed Tech Provides a Competitive Advantage
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Jefferies analyst David Katz initiates coverage on Rush Street Interactive (NYSE: RSI) with a Buy rating and a price target of $21.00. The company's internal technology development provides critical strategic and economic benefits that position the company for long-term value creation, as defined by a potential 14% market share of the $19B iGaming market and 7% share of the $19B sport betting market.
The analyst stated "Our approach to forecasting and valuation is similar to that with other operators. We are confident in the longer-term margins for RSI given historical profitability, although reinvestment into proliferating states is likely near term. We forecast revenue of $439MM in 2021, $577MM, in 2022, and $687MM in 2023, which supports a value of $19 on 6.0x 2023 revenue. We also include our multi-stage DCF to 2033, with stage 1, 2, and 3 growth rates of 55%, 35%, and 26%, respectively, WACC of 13%, and 3% terminal growth rate. Finally, we include our SOTP scenario analysis for both iGaming and Sports Betting assuming a blended range of 9-11% market share, 25% EBITDA margin, and ~13x multiple discounted from 2030. The results are $24 and $21. Ultimately, our blended target is $21."
Shares of Rush Street Interactive closed at $14.31 yesterday.
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