10 Best Entertainment Stocks To Buy According to Analysts

8. DraftKings Inc. (NASDAQ:DKNG)

Analysts’ Upside Potential: 32.90%

Number of Hedge Funds: 54

DraftKings Inc. (NASDAQ:DKNG) is a digital sports entertainment and gaming company that offers various online services. It is known for its Sportsbook and Daily Fantasy Sports platforms. Using the Sportsbook, users can place bets on the outcomes of sporting events through its mobile app and website. Whereas, the Daily Fantasy Sports platform allows users to create fantasy teams made up of real players from various sports leagues and compete based on the performance of actual players.

The company has been growing its unique customer count on its platforms while maintaining the Customer Acquisition Cost (CAC). Its newly acquired customers on sportsbook and iGaming platforms increased 14% year-over-year, with CAC improving 20% during the same time. As a result, the online sportsbook handle and gross gaming revenue increased 25% and 39% year-over-year, respectively.

Moreover, DraftKings Inc. (NASDAQ:DKNG) has been busy improving its customer engagement. This fall, management launched new and exclusive NBA betting markets aimed at engaging customers with significant game storylines. This initiative is designed to attract more users by making betting more relevant to the ongoing narratives in the league. In addition, it has also expanded its in-house Same Game Parlay feature, adding over 50 new NBA markets. Management also has plans to launch its sportsbook product in Missouri, where sports betting has recently been legalized. Missouri represents about 2% of the U.S. population, providing a substantial opportunity for growth.

Alger Spectra Fund stated the following regarding DraftKings Inc. (NASDAQ:DKNG) in its Q2 2024 investor letter:

“DraftKings Inc. (NASDAQ:DKNG) is a digital sports entertainment and gaming firm designed to ignite the passion of sports enthusiasts through a diverse offering that spans daily fantasy, regulated gaming, and digital media. We believe the company’s expertise in product development and customer acquisition, which established it as the market leader in daily fantasy sports (DFS), positions DraftKings to be a key driver in advancing the U.S. sports betting market’s growth. The company reported strong fiscal first quarter results, with revenues beating analyst estimates due to broad-based momentum in customer engagement and acquisition. However, on May 28th, the Illinois Senate passed a new state budget that includes a tiered progressive tax on sportsbook operators, effective July 1, 2024. This new tax ranges from 20% to 40% on gross revenues, a significant increase from the current 15% tax rate. Despite management’s belief that it can mitigate the tax impact by reducing promotions in Illinois, this development negatively affected the company’s share price.”