We recently compiled a list of the 10 Best Casino Stocks To Buy According to Analysts. In this article, we are going to take a look at where Rush Street Interactive, Inc. (NYSE:RSI) stands against the other casino stocks.
A Quick Recap of the Global Gambling Industry
The world has seen a rapid growth in online gambling recently, which is fueled by the legalization of sports betting around in many countries. The United States ban on sports betting was lifted in 2018 since then many states have moved to allow such activities online as well.
Makers of FanDuel and BetMGM have flooded the United States market with promotional content and advertising targeted at sports fans, encouraging them to participate in their fantasy leagues. Sports betting companies use various marketing techniques to cash in the sports seasons. In one of the BetMGM promotions, its brand ambassador Jamie Foxx, a movie star, encouraged sports fans to try betting on various outcomes in the game.
The advertisements have been working well to drive revenue for the companies. As per the American Gaming Association, in 2023, online sports bookmakers took more than $114 billion in Bets. Moreover, the US revenue from online sports betting reached around $16.9 billion during the same year.
After the United States, many other countries are working on building casinos to attract foreign tourism. As per a CNBC report on September 1, Thailand after Singapore and Macau is looking to develop casinos in the country. The strategy worked well for Macau as it overtook the title of the world’s largest gambling hub from Las Vegas. Singapore has been reaping the benefits as well from its two 14-year-old casinos. Thailand has now joined the race, and it is expected that the country will give tough competition to both Macau and Singapore. Its casinos are expected to generate $5 billion in revenue, which is 1% of the country’s GDP.
In one of our recent articles titled, 7 Best Small-Cap Casino Stocks Hedge Funds Are Buying, we found that Asia Pacific is one of the major contributors to the global betting industry. Here’s an excerpt from the piece:
“Legalization of gambling, rapid urbanization, increased use of social media, and rising internet penetration rate are factors driving market growth. As per the report, the Asia Pacific region is the main contributor in the global betting industry accounting for more than 32.4% of the total market valuation. The Asia Pacific region is followed by North America and Europe. Looking ahead, South America and Africa are expected to be the next hot markets for gambling and casino companies. The South American region is expected to grow at a CAGR of 23.4%, whereas Africa is expected to grow at 8%. Rapid legalization and increasing disposable income in these regions contribute to the growth.
If we look at the segment-wise analysis, the lotteries segment accounts for more than 53% of the total market value and is expected to grow at the fastest rate during the forecasted period.”
Are Sports Betting Stocks Slipping Due to the Upcoming Tax?
Illinois lawmakers are drafting a new budget that includes a sharp increase to the state tax on sports betting operators. On May 28, CNBC’s reporter Contessa Brewer mentioned that operators in Illinois have paid 15% on sports betting since it went live in June 2021. The new tax proposal is expected to increase the tax to a range of 20% to 40% depending on gross receipts. Meaning that the largest betting operators are expected to be attacked the highest with this increase.
The law is yet to be passed, but if it gets approved it will make Illinois’ highest tax rate the second highest behind New York and New Hampshire. For context, Illinois is the 4th largest state for sports betting and betters waggered more than $1.2 billion in March 2024 alone. Sports betting associations are not happy with the tax proposal. The CEO of one of the largest sports betting operators in the United States mentioned that the burden of this tax is going to shit to the consumers.
Now that we have looked at the overall gambling and casino industry. Let’s talk about the 10 best casino stocks to buy according to analysts.
Our Methodology
We used the Finviz stock screener to come up with stocks operating in the gambling and casino industry. First, we aggregated a list of casino stocks that were most widely held by hedge funds in Q2 2024. Next, we ranked them based on the average price target upside as per Wall Street analysts. The list is ranked in ascending order of the average price target upside as of September 1.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A closeup shot of slot machines and a player nervously waiting for the spin to stop.
Rush Street Interactive, Inc. (NYSE:RSI)
Average Price Target Upside as of September 1: 49.41%
Number of Hedge Fund Holders: 27
Rush Street Interactive, Inc. (NYSE:RSI) operates as an online casino and sports betting (in-person) company. It provides real monkey online casinos, sports betting facilities, and other social games through various brand names including PlaySugarHouse and RushBet.
The company was held by 27 hedge funds in the second quarter of 2024 with total stakes worth $234.35 million. Rush Street Interactive, Inc. (NYSE:RSI) is one of the best casino stocks to buy according to analysts. 9 analysts have a consensus Buy rating on the stock, with their 12-month median price target of $14 presenting a 49% upside from current levels.
Rush Street Interactive, Inc. (NYSE:RSI) has operations in the US, Mexico, Latin America, and Canada. During the second quarter results for fiscal 2024, the company revealed that it improved its US and Canada Monthly Active Users by 24%, whereas MAUs for Latin America grew 79% year-over-year. Thereby demonstrating a growing market presence across all its operating regions.
Its iCasino segment was a success with revenue for the segment growing 40% year-over-year. The sports betting segment was also impressive and posted a 25% increase during the same time. Overall, the revenue of Rush Street Interactive, Inc. (NYSE:RSI) reached $220.4 for the quarter, up 34% from the previous year. The company has improved its earnings as a result of a robust financial performance, demonstrated by a $20 million improvement in adjusted EBITDA year-over-year.
Here is what Carillon Tower Advisers has to say about Rush Street Interactive, Inc. in its Q3 2021 investor letter:
“Rush Street Interactive is an online casino (iGaming) and sports gambling company. The company reported a strong quarter that delivered upside to investor expectations, and the Rush Street also lifted its forward guidance targets. Also aiding the stock the quarter were a few notable transactions in the online sports betting/iGaming space in which the company operates. These transactions helped to revalue Rush Street’s offerings and drive positive investor sentiment.”
Overall RSI ranks 3rd on our list of the best casino stocks to buy. While we acknowledge the potential of RSI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
