Rush Street Interactive: A Buying Opportunity After a Post-Earnings Dip

Rush Street Interactive (RSI) delivered a standout quarter in Q1 2025, with 21% revenue growth to $262.4 million, a near-doubling of Adjusted EBITDA to $33.2 million, and an EPS beat of 28.6% that sent shares soaring in after-hours trading. Yet, the stock dipped 3.1% in regular trading—a move investors should view as a buying opportunity. Beneath the short-term volatility lies a company positioned to capitalize on secular tailwinds in online gaming, margin expansion, and its dominance in high-growth markets like Latin America.

The Q1 Story: Growth and Profitability Take Center Stage

RSI’s first-quarter results underscore its transition to profitability. The company reported net income of $11.2 million, reversing a $2.2 million loss in 2024. The Adjusted EBITDA margin expanded to 12.7%, up from 7.9% a year ago, as cost discipline and revenue leverage kicked in. User growth was equally compelling:
- U.S./Canada MAUs rose 17% to 203,000, while Latin American MAUs surged 61% to 354,000.
- Despite a dip in Latin America’s ARPMAU, RSI’s focus on high-value players and retention strategies suggest this is a short-term blip, not a trend.

The EPS beat—driven by higher revenue and lower marketing spend (just 15% of revenue vs. 21% in 2024)—highlighted operational efficiency. Even under GAAP, RSI’s net income turned positive, a milestone that should allay concerns over its path to sustained profitability.

Why the Dip? And Why It’s Overdone

The 3.1% post-earnings decline likely reflects two factors:
1. P/E Multiple Concerns: RSI’s trailing P/E of 35.9x may seem elevated, but this metric ignores the company’s 35% full-year EBITDA growth guidance ($125 million midpoint) and its 13% revenue growth trajectory ($1.05 billion midpoint). At these growth rates, the P/E compresses to ~27x forward earnings, a reasonable premium for a high-growth tech company.
2. Short-Term Guidance “Miss”: Analysts had hoped for raised guidance, but RSI’s unchanged targets reflect prudence, not weakness. The company’s track record of beating estimates (as it did in Q1) suggests it’s underpromising to overdeliver—a winning strategy in volatile markets.

The Case for Undervaluation: Growth and Margins Are Just Getting Started

RSI’s Latin American expansion is a goldmine. With 61% MAU growth in Mexico and Colombia, RSI is capitalizing on underpenetrated markets where online gaming adoption is rising fast. Meanwhile, its U.S. operations—now in 15 states—are scaling efficiently, with casino revenue up 25% and sports betting up 11% in Q1.

The margin story is critical. RSI’s Adjusted EBITDA nearly doubled in Q1, and its full-year guidance implies a further margin expansion. With sales and marketing costs flat year-over-year, RSI is proving it can grow without overinvesting. This bodes well for future free cash flow, especially as it repurchases stock ($5.2 million to date under a $50 million program).

Secular Tailwinds: The Online Gaming Boom

The online gaming sector is a $50+ billion market, growing at ~8% annually, with regulated markets like the U.S. and Latin America outpacing the rest. RSI’s player-centric strategy—focused on retention, innovation, and localized product offerings—positions it to win share. CEO Richard Schwartz’s emphasis on “quality over quantity” (targeting high-LTV users) suggests RSI isn’t chasing vanity metrics, but sustainable growth.

The Risk? Overlooking the Big Picture

Critics cite regulatory risks, competition, and economic headwinds. But RSI’s diversified market presence (U.S., Canada, 3 Latin American countries) reduces geographic exposure, while its #1 or #2 market share in most regions gives it pricing power. Even in a slowdown, its high-margin, low-overhead digital model should outperform.

Conclusion: A Rare Entry Point Before Market Recognition

RSI’s post-earnings dip has created a low-risk entry point for investors. The company’s profitability, margin expansion, and expansion into high-growth markets are structural advantages that will gain traction as 2025 progresses. At 35.9x P/E, the stock is priced for perfection, but with 35% EBITDA growth and 13% revenue growth on track, it’s a “buy the dip” opportunity.

The market may be pricing in near-term volatility, but RSI’s fundamentals suggest this is a turnaround story in motion. Investors who act now can secure a stake in a company poised to dominate the regulated online gaming sector for years to come.

Action to take: Buy RSI on dips below $13.50, with a 12-month price target of $17–$20, reflecting its growth trajectory and margin upside.