Rush Street Interactive
Executive Summary & Thesis
Initiate at HOLD, $31.50 target. Rush Street is the cleanest execution story in US iGaming: a casino-first operator that just printed the best quarter in its history — revenue $370.4m (+41%, the fastest growth in four years), adjusted EBITDA $60.2m (+81%), net income $26.2m (+134%), all records, all beating consensus by double digits — and raised FY26 guidance to $1.49–1.54bn revenue and $230–250m EBITDA. The problem is the price. The stock has more than doubled off its $13.20 52-week low to an all-time high, sits at ~26× FY26E EBITDA and ~4.5× sales, and now trades at the Street’s average target ($29.80). The quality is real; the value has been paid for.
Our discipline is to own this kind of compounder at a price that doesn’t require the beat-and-raise cadence to continue indefinitely. At $29.31 the market is underwriting both continued ~30%+ growth and a premium multiple holding through visible tax-and-regulatory risk (Colombia’s temporary 16% emergency tax decree is explicitly baked into guidance; US state iGaming tax hikes are a live legislative theme). We would be aggressive accumulators below ~$24 — ~21× FY26E / ~16× FY27E EBITDA — and are content to hold, not chase, at the all-time high.
Key Catalysts
- ▮22 Jun 2026 — S&P SmallCap 600 inclusion effective (replacing Monro); passive demand front-loaded — watch for sell-the-event.
- ▮Jul 2026 — Alberta launch (included in guidance); first regulated Canadian provincial expansion beyond Ontario.
- ▮H2 2026 — Q2/Q3 prints: the beat-and-raise cadence is now the valuation’s load-bearing wall.
- ▮Pending — CFTC prediction-markets application; approval would open the 50-state event-contract channel.
- ▮Ongoing — US iGaming legalisation: any new state (none in guidance) is pure upside; conversely, tax-rate legislation is the key downside catalyst.
Business Model & Five Forces
RSI operates BetRivers and PlaySugarHouse in the US/Canada and RushBet in Latin America: real-money online casino and sportsbook in 15 US states (including the exclusive Delaware Lottery iGaming arrangement), Ontario, and regulated LatAm markets led by Colombia and Mexico. The strategy is unapologetically casino-first: iGaming carries structurally higher hold, lower promotional intensity and stickier cohorts than OSB, and RSI’s proprietary platform (in-house trading, loyalty, bonusing engine) is tuned for it.
| Q1 2026 | MAUs | Δ YoY | ARPMAU | Rev. share (derived) |
|---|---|---|---|---|
| North America | ~296,000 | +46% (+62% casino) | $317 | ~76% (est.) |
| Latin America | ~543,000 | +54% | $54 | ~24% (est.) |
| Group | ~839,000 | +51% | — | $370.4m revenue |
Porter Five Forces
| Force | Intensity | Read |
|---|---|---|
| Rivalry | High but narrower | In iGaming the field is DraftKings, FanDuel, BetMGM, Caesars Palace Online, Fanatics — not the 20-brand OSB melee; product quality differentiates |
| New entrants | Rising | Prediction markets reach all 50 states federally; RSI’s own CFTC application converts the threat into an option |
| Substitutes | Contained | Sweepstakes casinos under state ban waves funnel players to regulated iGaming — a tailwind for incumbents |
| Supplier power | Moderate | Live-dealer/content concentration (Evolution et al.); mitigated by proprietary platform and in-house games |
| Buyer power | Low | Atomised players; loyalty economics and localised UX raise switching costs |
Industry
US iGaming is the best business in regulated online gambling and the scarcest: only a handful of states have legalised, which caps the TAM but also the competitive intensity — and every incremental legalisation is a step-change for the licensed incumbents. RSI’s casino-first positioning means it is not primarily fighting the FanDuel/DraftKings OSB duopoly (~73% of US OSB GGR between them) for parlay handle; it is compounding ARPMAU in casino states and exporting the playbook to Latin America, where it is a market leader in Colombia.
Three sector currents matter. Prediction markets: CFTC-regulated event contracts now span all 50 states, state-tax-free; operators (DraftKings, FanDuel, Fanatics, Underdog) have launched, political support for CFTC jurisdiction was reiterated in late May, and RSI has applied — optionality, but also margin-structure risk to state-licensed OSB. Tax pressure: Colombia’s temporary 16% emergency tax decree (assumed to persist in guidance) and recurring US state proposals to raise iGaming/OSB rates are the sector’s principal earnings risk. Consolidation: the Fertitta–Caesars take-private and MGM takeout chatter have re-rated scarce, profitable pure-plays — a category of exactly one obvious name: RSI.
Financial Analysis
| ($m) | FY2025 (derived) | Q1 2026 (actual) | FY2026E (guide) |
|---|---|---|---|
| Revenue | ~1,135 | 370.4 (+41%) | 1,490–1,540 (+31–36%) |
| Adjusted EBITDA | ~153 | 60.2 (+81%) | 230–250 (+50–63%) |
| EBITDA margin | ~13.5% | 16.3% | ~15.4–16.2% |
| Net income | — | 26.2 (+134%) | — |
| Adj. S&M (% rev) | — | 46.2 (12.5%) | — |
| Balance sheet | net cash | no debt | +$260m May raise; $100m buyback auth. |
The financial story is operating leverage arriving on schedule: record users and record margins in the same quarter, EBITDA beating consensus by ~25%, marketing efficiency improving while MAU growth accelerates. The May capital moves look contradictory (raise $260m, authorise $100m of buybacks) but read as: fund LatAm land-grab from the offering, signal valuation discipline with the authorisation, and deepen the float ahead of index inclusion. Insider sales by the CEO, COO and a Bluhm family trust were disclosed through the spring — routine diversification at an all-time high, but worth noting alongside the follow-on: insiders and the company were both sellers of stock in the $26–29 range that new money is being asked to pay.
Forecast
Guidance (filing-sourced): FY26 revenue $1,490–1,540m, adjusted EBITDA $230–250m, assuming only live jurisdictions plus the July 2026 Alberta launch, and persistence of current tax structures including Colombia’s 16% decree. Our estimates beyond that:
- ▮FY26A likely above guide (est.): the Q1 beat (+11% rev, +25% EBITDA vs consensus) plus a raised-not-rebased guide suggests $255–270m EBITDA is achievable on current trends.
- ▮FY27E revenue ~$1.85–1.95bn, EBITDA ~$315–330m (our estimates): ~25–28% growth with continuing margin build toward ~17%; assumes no new US iGaming state (upside) and no LatAm tax escalation beyond the decree (risk).
- ▮Watch items: Delaware ramp maturation, Alberta launch economics, Mexico regulatory developments, prediction-markets application outcome.
Valuation
Where It Trades
| Metric | Value | Basis |
|---|---|---|
| Market cap | ~$6.8bn | $29.31 × ~233m f.d. units (quote-implied, triangulated) |
| EV (est.) | ~$6.2–6.4bn | net cash incl. May raise — estimate; precise cash not pulled from 10-Q |
| EV / FY26E EBITDA | ~26× | guide midpoint $240m |
| EV / FY27E EBITDA | ~19–20× | our $315–330m estimate |
| EV / FY26E sales | ~4.1–4.2× | guide mid $1,515m |
| Street | avg PT $29.80 | high $33 / low $26; stock at the average |
Target Construction
We anchor on 21× FY27E EBITDA (~$322m mid) — a premium to large-cap OSB-led peers, justified by iGaming mix, net cash and growth, but below today’s ~26× because the multiple should compress as growth decelerates toward the mid-20s percent. That yields ~$6.8bn EV; adding estimated net cash gives ~$7.3bn equity, or ~$31–31.6 per unit. A 3.5× FY27E sales cross-check lands ~$31 (a full 4× would imply $34–36 — bull-case territory, not base). Target $31.50 (+7.5%). We deliberately do not capitalise the prediction-markets application or unlegislated states — that is option value, not base case.
HOLD. A genuinely superb operator at a price that already says so. The Kelly arithmetic at $29.31 — roughly +30% in the bull path, −30% in a tax-shock derating, with the base case a single-digit grind to $31.50 — sizes to a token position at best. Our action levels: aggressive accumulation below ~$24 (~16× FY27E EBITDA); re-examine on any pullback toward $26 (the May offering price, where the company itself cleared stock); treat any takeover approach as an immediate situation-anchored re-rate.
Risks & Scenario Analysis
- ▮Beat-and-raise cadence holds; FY26 EBITDA $260m+
- ▮PM licence granted; new iGaming state legalises
- ▮Scarcity premium / takeout interest re-emerges
- ▮Guidance delivered, modest beats
- ▮Multiple eases to ~21× as growth normalises
- ▮Index flows neutralise post-22 Jun
- ▮Colombia decree hardens / LatAm tax shock
- ▮US state iGaming tax hikes compress margins
- ▮Multiple to ~15× on growth scare
Risk Stack
- ▮Tax & regulatory (the big one). Guidance explicitly assumes Colombia’s temporary 16% tax decree persists as-is; escalation there, in Mexico, or via US state iGaming/OSB rate hikes flows straight through EBITDA.
- ▮Concentration. Earnings skew to a short list of iGaming states (PA, NJ, MI, DE) plus Colombia; one adverse jurisdiction matters.
- ▮Valuation / flow reversal. ATH entry at consensus PT, with index-inclusion buying complete on 22 June; the multiple, not the business, is the principal short-term risk.
- ▮Governance. Up-C structure with founder (Bluhm family) control has historically warranted a discount; June’s investor-backed governance changes and board slate are incremental positives — direction right, structure intact.
- ▮Insider supply. Disclosed CEO/COO/founder-trust sales plus the $260m follow-on put meaningful stock into the market in the high-$20s; routine and transparent, but supply is supply.
- ▮Prediction-market two-sidedness. If CFTC channels keep scaling, state-licensed OSB economics erode faster than RSI’s own application can offset; casino-first mix is partial insulation.
- ▮Competition. DraftKings/FanDuel/Fanatics pushing iCasino harder would attack the core; to date RSI’s product-led retention has held.
SOURCES & FLAGS. Filing-sourced: Q1 2026 results and FY26 guidance per company 8-K (28 Apr 2026), incl. MAU/ARPMAU and guidance assumptions. Derived: FY2025 revenue/EBITDA (deflated from guidance growth ranges); NA/LatAm revenue split (MAU × ARPMAU); FY27 estimates (ours). Press-sourced/triangulated: price $29.31 (11 Jun close, quote services); market cap and ~233m f.d. units (quote-implied); $260m offering and $100m buyback (Gaming America); S&P SmallCap 600 inclusion eff. 22 Jun (S&P DJI via casino.org); CFTC prediction-markets application (TipRanks); net-cash position stated qualitatively — precise cash not verified against the 10-Q. Note: a “$0.09 quarterly dividend” appearing in some RSI quote feeds belongs to Rogers Sugar (TSX: RSI); Rush Street pays no dividend.
DISCLAIMER. Research commentary for informational purposes; not investment advice, an offer, or a solicitation. Estimates are labelled; verify against primary filings. Forward-looking statements are interpretation, not forecasts.
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