In this article, we discuss the 5 best booming stocks to buy now. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Booming Stocks to Buy Now.
5. DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 37
Percentage Increase in Share Price Over Past Six Months: 78%
DraftKings Inc. (NASDAQ:DKNG) operates a digital sports entertainment and gaming company. Over the past two quarters, the company has beat expectations on earnings and raised guidance numbers, wooing investors who had shed the stock because of valuation concerns last year in light of recession fears. Since the beginning of the year, the shares have skyrocketed, driven by a strong football season.
On May 22, investment advisory UBS upgraded DraftKings (NASDAQ: DKNG) stock to Buy from Neutral and raised the price target to $30 from $19, backing the firm to deliver 20%-plus annual revenue growth through 2026.
At the end of the first quarter of 2023, 37 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in DraftKings Inc. (NASDAQ:DKNG), compared to 32 in the preceding quarter worth $707 million.
In its Q1 2023 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and DraftKings (NASDAQ: DKNG) was one of them. Here is what the fund said:
“We re-initiated a position in former Fund holding DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy sports operator. DraftKings’ mobile applications offer consumers the ability to wager on a wide variety of sporting events and play hundreds of real-money casino games. The company has spent the past three years building a proprietary technology stack that improves the customer experience and delivers best-in-class breadth of bet types (such as parlays, same-game parlays, and player props). State-level online sports betting (OSB) and iCasino legalization, along with a multi-year consumer adoption timeline in active states, has supported a 90% revenue growth rate for DraftKings since 2020. The opportunity for OSB legalization remains significant, with under 50% of the U.S. population currently having legal mobile sports betting. We expect 65% to 80% of the population will eventually have access to OSB. ICasino is currently legal in just seven states representing roughly 13% of the population. ICasino product adoption in legalized states has been robust, with the average user spending twice as much as a sports bettor. While the pace of legalization for iCasino has been slower, we believe additional states will pass regulation in the coming years.
As U.S. states began to legalize sports betting, the DraftKings management team moved quickly to build widespread brand awareness. DraftKings is the #2 operator in both OSB and iCasino by a wide margin, and has demonstrated improving market share trends across almost all states. When a new state legalizes sports betting, DraftKings has a first mover advantage as many of its customers are converted from the DraftKings daily fantasy sports offering. The quality of their sportsbook product along with increasingly targeted promotional spending results in strong customer retention and high lifetime values. In states where iCasino is legal, DraftKings can cross-sell OSB customers. DraftKings’ scale and product advantages are creating a flywheel that will enable the company to continue to out-invest the competition in acquisition marketing, retention, and research and development. The high barriers to entry are resulting in a consolidated industry that will eventually lead to a highly profitable business. This is evidenced by older-vintage state contribution margins that are already approaching 40%. Longer term, we believe DraftKings can generate EBITDA margins between 20% and 30% with strong free-cash-flow conversion.”
