Rush Street Interactive, the parent of BetRivers, reported 39% third-quarter revenue growth on October 28, but several analysts lowered their price targets after the company said October trends point to the low end of its full-year revenue guidance.
Revenue of $385.9 million fell short of analyst consensus estimates, which ranged from about $388 million to $390.8 million depending on the source. Profit beat expectations.
Revenue rose from $277.9 million a year earlier. Adjusted EBITDA increased 73% to $62.2 million, and net income rose 93% to $28.7 million. Earnings were $0.15 per share, above the $0.13 to $0.14 consensus.
Adjusted EBITDA included a foreign currency gain. Excluding it, the company reported $57.9 million and a 15% margin. Sales and marketing expense rose 43% to $56.0 million. The results also included a $4.3 million one-time gain in general and administrative expense, which an analyst asked management to confirm.
Revenue fell from the second quarter’s record $393.8 million, when growth was 46%.
Wells Fargo cut its target to $26 from $36 and kept an overweight rating. Citizens JMP lowered its target to $24 from $34 and kept a market outperform rating. Needham reduced its target to $25 from $36 and kept a buy rating. JPMorgan lowered its target to $18 and kept a neutral rating. Craig-Hallum and Jefferies also reduced targets while keeping buy ratings, to $29 and $26.
Most cuts left ratings unchanged. Analysts also questioned how much of the slowdown is industry-wide. On the earnings call, Craig-Hallum’s Ryan Sigdahl said industry growth had “decelerated after years and years and years” of consistency.
Shares fell about 10% in trading after the report, following a decline of roughly 21% in the 30 days before it tied to concern about higher second-half marketing spend. The stock had reached all-time highs in mid-July.
Growth came unevenly. North American revenue rose 14%, while Latin America revenue was up 218% from a year earlier. Online casino accounts for about 75% of revenue.
Gross margin rose to 36.4%, up 240 basis points from a year earlier and 90 basis points from the second quarter. The company said continued execution in online casino and Latin America drove the quarter.
Rush Street operates BetRivers and PlaySugarHouse in the United States and Canada and runs online casino and sports betting in Latin America.
Rush Street reiterated full-year revenue guidance of $1.56 billion to $1.60 billion, which implies 38% to 41% growth. It kept adjusted EBITDA guidance at $245 million to $265 million. The company said October is tracking toward the low end of the revenue range and the midpoint of the EBITDA range.
The warning stands out because the company raised its outlook after the second quarter. Analysts will be watching whether fourth-quarter trends hold at the low end of that range, how much marketing spend rises during football season, and whether North American growth moves back toward double digits.
The company’s quarterly filing and earnings release with the Securities and Exchange Commission contain the figures cited here. Analyst price targets are opinions that change and do not indicate how the stock will perform.
