Why Rush Street Interactive Stock Was Down Today
What happened
Shares of Rush Street Interactive (NYSE: RSI) were down 21.9% as of 12:44 p.m. ET on Thursday. The online casino and sports betting company reported a weaker-than-expected quarter that sent the shares tumbling.
So what
On the surface, revenue growth looked strong, increasing by 31% year over year. But that is a significant deceleration over the previous quarter's 57% top-line growth rate.
More concerning from the market's perspective are the losses on the bottom line. Rush Street reported a loss of $38 million, and as we've seen lately, the market hasn't had much patience for highly valued stocks that don't show growth in profitability.
Image source: Getty Images.
Rush Street's results are in stark contrast to Scientific Gaming. The latter recently posted revenue growth of 20% and a significant jump in net profit for the fourth quarter. That helped send shares of Scientific Gaming up sharply after earnings.
Now what
Rush Street's guidance didn't give investors much reason to be more bullish on the company's prospects. Management is calling for revenue to decelerate further to 24% for the full year in 2022.
CEO Richard Schwartz addressed the concerns about the company's profitability on theearnings callwith analysts. "We've been focused on building a sustainable long-term business with profitability as our central goal since founding [Rush Street Interactive] nearly 10 years ago," Schwartz said.
The company recently launched its iOS sportsbook-casino app at the end of 2021 and plans to expand into Canada and Mexico this year. Investments in new markets might continue to weigh on profitability in the short term. Over time, the improving profitability from existing markets could outweigh the expenses to penetrate new markets.
The stock is currently 62% off its all-time high, but the founders of the company own more than half of the outstanding shares. That skin in the game gives management an incentive to grow the long-term value of the business, so perhaps the concerns over profitability are overblown. Investors might want to take a wait-and-see approach, regardless.
10 stocks we like better than Rush Street Interactive, Inc.
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Rush Street Interactive, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 20, 2022
John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
