Rush Street Interactive could benefit from entering the Peruvian market

Posted: July 21, 2022, 2:37 a.m.

Last update: July 21, 2022, 2:37 a.m.

Peru recently legalized iGaming and online sports betting, joining five other Latin American countries and the move could have positive implications for some US-based gaming companies, including Rush Street Interactive (NYSE: ROI).

Rush Street Interactive
A Rush Street Interactive ad. An analyst is optimistic about the company’s opportunity in Peru. (Picture: Twitter)

Online sports betting is estimated to generate an annual handful of $1 billion in Peru and with the government’s favorable 12% tax rate, this could be an attractive market for operators such as RSI. RSI operates under the BetRivers and PlaySugarHouse brands and is currently available with mobile or retail businesses in Colorado, Illinois, Indiana, Iowa, Michigan, New Jersey, New York, Pennsylvania, Virginia and West Virginia. Following a minority investment in mobile game developer Boom Entertainment, which was announced last August, RSI gained access to Louisiana, Mississippi and New Mexico.

As such, the investing community typically views the RSI through the lens of the US market, but analysts say the Latin American opportunity should not be ignored.

This (Peru) could represent a net gaming revenue (NGR) opportunity of over $30 million for RSI, which already operates in Colombia and Mexico,” Roth Capital analyst Edward Engel wrote in a recent note. . “Longer term, we still believe LatAm offers a $3 billion addressable market, which could net RSI $120-240 million in NGR if it claims a 5-10% market share. While investors generally overlook RSI’s LatAm exposure, we expect more interest with the launch of markets such as Brazil.

He rates RSI stock as a “buy” with a price target of $8, implying a 40% upside from the July 20 close.

Rush Street Interactive embraces Latin America

News of Peru’s legalization of iGaming and sports betting came about a week after RSI rolled out an online casino and sports betting in Mexico, making it the first US-based gaming company United to go into debt in the second largest economy in Latin America.

RSI was also the first US-based gaming company to launch a legal and regulated online sports betting site in Colombia, South America’s third largest economy. RushBet.co, the company’s offering in Colombia, is already one of the leading online gaming entities there. RSI is estimated to have 20% of the betting market there, which Engel says the operator can replicate in Peru if it is first to market there.

Consolidating its footprint in Latin America could pay dividends for RSI. While its rivals in the United States are engaged in costly customer acquisition battles, RSI adds geographic diversity while probably not spending as much to acquire customers in Latin America as they do in the United States.

Colombia, Mexico and Peru have a combined population of nearly 214 million, indicating that it is significantly expanding its total addressable market by entering these countries.

Other opportunities in Latin America

By establishing itself in the region, RSI could potentially tap into other markets there, including Argentina and Brazil, the latter being the crown jewel of Latin American gaming.

“Argentina is legalizing iGaming province by province, where its two largest provinces have already legalized (covering 41% of the population of 46 million),” adds Roth’s Engel. “In Brazil, OSB/iGaming has also been legalized, but the implementation of the regulations has been slow. While an industry launch by YE2022 still seems feasible, we expect the market to mirror Canada and Ontario, where gray market operators retain a dominant market share.

The analyst also notes that RSI shares are inexpensive compared to competitors and the operator has a penchant for beating market share expectations.