We recently compiled a list of the 10 Best Leisure Stocks To Buy Now. In this article, we will look at where DraftKings Inc. (NASDAQ:DKNG) stands against the best leisure stocks to buy now.
In recent years, the leisure market has experienced remarkable growth. According to Market Research Intellect, the size of the global leisure market was estimated at $1.46 trillion in 2023 and is projected to expand at a compound annual growth rate of 21.8% from 2024 to 2031, when it will have grown to $8.6 trillion.
Along with growth, according to the YouGov survey, there were also notable changes in the leisure and entertainment industry in 2023 due to changing customer demands and technological breakthroughs. Even though 81% of US and 79% of UK customers recognize the value of museums, more than half of them only occasionally visit them. On the other hand, only 5% of people in the APAC and UAE skip theme parks, compared to 30% in North America.
While out-of-home entertainment expenses are on the rise, 13% of customers intend to spend more. Additionally, 36% of viewers find advertisements entertaining, and 36% of them are using virtual reality. In the United States, 10% prefer to buy movie tickets in advance, while 27% are concerned about how AI breakthroughs may affect professions, notably in information technology and accounting.
In the meantime, gambling is changing; 70% of US gamblers are open to sports betting with AI assistance, and cryptocurrency betting is becoming more popular in the US and the UK. As we have mentioned in our article, “10 Best Sports Betting Stocks to Buy Now,” generative AI is projected to dramatically impact sports betting in the next 12-18 months.
As per YouGov study, with 10% of UK consumers possessing smart devices and 24% looking at second-hand equipment, the fitness industry has also experienced growth. In general, live events such as food and drink festivals remain popular; even with safety concerns, 45% of attendees want to participate in 2024. Lastly, a shift in consumer views is evident in the rise of dynamic pricing, particularly in the US, where 54% of consumers are willing to pay more to support artists.
On the other hand, the size of the global leisure travel market was valued at $340.31 billion in 2022 and is projected to grow at a CAGR of 22.6% from USD 417.3 billion in 2023 to $2129.96 billion by 2031, as per SkyQuest.
Regionally, North America has been the market leader for leisure travel, especially the United States and Canada. However, when it comes to the global leisure travel industry, Asia-Pacific is expanding at the fastest rate. Countries in Southeast Asia, such as China and India, are major destinations for tourists in the area.
Amid the growth, a most recent Longwoods International tracking study of American travelers indicates that 39% of them plan to go abroad for leisure over the next 12 months. Furthermore, 34% of those who plan to travel abroad for leisure say they will travel abroad more this year, 50% plan to take about the same number of such trips, and only 16% say they would travel abroad less.
Amir Eylon, President and CEO of Longwoods International, stated that the expected boost in international travel by Americans is impressive, given lingering concerns about inflation and the financial health of the U.S. consumer. Moreover, he revealed that it is further evidence that American travelers see COVID-19 fading away in their rear-view mirror.
Methodology:
We sifted through holdings of leisure ETFs and online rankings to form an initial list of 20 leisure stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 56
Revenue Growth Rate (year-over-year): 63.60%
Founded in 2012, DraftKings Inc. (NASDAQ:DKNG) is a pioneer in the daily fantasy sports industry. The company then entered the online sports and casino gaming marketplaces in response to a 2018 Supreme Court ruling permitting states to permit online sports wagering. It became the industry leader in sports betting and iGaming in North America and today has a 70% revenue share with FanDuel.
Roughly 40% of Canadians can now access DraftKings’ iGaming products in seven states and its online or retail sports betting in 25 states. The firm also develops and licenses online games and operates a commission-based, non-fungible token marketplace.
In 2023, the revenue surged by 63.60% YoY, driven primarily by continued healthy customer engagement, efficient acquisition of new customers,
The firm reported Q2 2024 revenues of $1104 million, a 26.2% YoY increase led by organic growth factors, and new market entries, which just missed Wall Street estimations, even though adjusted EPS of $0.22 beat expectations. Despite a decent performance, DKNG shares fell by about 4% after the Q2 2024 data were released.
The company raised its revenue forecast for 2024, but adjusted EBITDA was lower due to increased client acquisition expenses and a change in the Illinois tax rate.
Analysts at Morningstar predict that by 2030, the massive online gambling market in North America will be well-positioned to capitalize on the $40 billion sports betting and iGaming market there. Nevertheless, since some states have more than twenty state licenses, there is intense competition among online gaming companies.
Benchmark recently raised its price target for DraftKings Inc. (NASDAQ:DKNG) from $41 to $44, maintaining its Buy recommendation on the company’s shares. The analyst states that DraftKings remains “a top idea for 2024.” With shares down 2% so far this year, a “strong run” for the stock is anticipated till year-end. DraftKings’ better outlook, according to the analyst, “creates an attractive entry point,” as a result of increased market win margins in Q3, the development of new users, the application of traditional tax reduction strategies, and valuation contraction in advance of the NFL season.
Paul Marshall And Ian Wace’s Marshall Wace LLP is the largest shareholder in the company, with 9,410,431 shares worth $359.20 million.
Overall DKNG ranks 4th on our list of the best leisure stocks to buy now. While we acknowledge the potential of DKNG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This post was originally published on Insider Monkey.