1. DraftKings Inc. (NYSE:DKNG)
Number of Hedge Fund Holders: 56
DraftKings Inc. (NASDAQ:DKNG) is the best Las Vegas stock to buy now. The stock was held by 56 hedge funds in the second quarter with total stakes worth $2.25 billion. Marshall Wace LLP is the top shareholder, with a position worth $359.20 million The company functions in the digital sports betting and casino industry. It has a wide portfolio of online sports betting games that are commonly used across the United States and Canada.
Its major segments include online sports betting and iGaming. DraftKings Inc.’s (NASDAQ:DKNG) sportsbook is live in more than 27 states in Canada. Moreover, its Daily Fantasy league, an online platform, is now available in more than 44 provinces giving the company significant market reach.
With the recent news of increased tax rates on sports betting the company faced some headwinds and a pressurizing regulatory environment. However, regardless of the pressure, it was still able to increase its customer acquisition by 80% year-over-year.
While the customer acquisition growth rate is impressive, what counts is the customer acquisition cost. Management was able to reduce the cost of acquiring new customers by more than 40% during the most recent quarter.
A growing customer base means skyrocketing revenues. DraftKings Inc. (NASDAQ:DKNG) grew its revenue by 26% year-over-year and has also raised its full-year guidance indicating a 41% increase year-over-year.
To cope with the tax rate hike, management has decided not to take a toll on itself and will be rolling out increased gaming tax for its customers in 4 states next year. Lastly, in terms of earnings and profitability, DraftKings Inc. (NASDAQ:DKNG) has plans to bring its adjusted EBITDA between $900 million to $1 billion by next year.
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.”
While we acknowledge the potential of DraftKings Inc. (NASDAQ:DKNG) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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