Tendencies will be simple to overlook. In any case, many individuals heard about artificial intelligence (AI) and the way it was the “subsequent large factor,” and but, lots of those self same individuals by no means invested a penny into AI shares like Nvidia, Tremendous Micro Laptop, or SoundHound AI earlier than they went parabolic over the past two years.
So, what different traits — and potential multibaggers — would possibly traders be lacking?
I feel I’ve recognized one such pattern. I do not assume will probably be as large or necessary as AI, however it may nonetheless make savvy traders happier and richer within the course of. The pattern is sports activities betting, and the inventory is DraftKings (NASDAQ: DKNG). Here is what it’s worthwhile to know.
Picture supply: Getty Pictures.
Why is sports activities betting taking off?
First issues first: In 2018, the U.S. Supreme Courtroom struck down a federal ban on sports betting. Since then, dozens of states have handed state legal guidelines allowing some type of sports activities wagering. As of this writing, 38 states and the District of Columbia now allow playing on sports activities. When it comes to inhabitants, properly over 200 million Individuals can now place authorized sports activities bets of their dwelling state.
You will see that extra infographics at Statista
Meaning the variety of potential bettors — clients for sportsbooks like DraftKings — has soared greater than 10x during the last six years. That stated, the expansion is not over — not by an extended shot.
Of the 12 states the place sports activities betting stays unlawful, three states (California, Texas, and Georgia) rank among the many prime 10 in general inhabitants.
In different phrases, there are nonetheless properly over 80 million Individuals who can’t legally place a sports activities wager of their dwelling state. Californians voted down sports activities betting in 2022. Texas is unlikely to go any laws till 2025, and Georgia lawmakers did not go laws legalizing sports activities betting this spring.
At any price, the sports activities betting market continues to be rising at a speedy tempo. In keeping with the American Gaming Affiliation, gaming income derived from sports activities betting has elevated from $0.9 billion in 2019 to over $10.9 billion in 2023. In different phrases, the expansion is speedy, and there stay loads of untapped markets.
You will see that extra infographics at Statista
Why is DraftKings positioned to capitalize on the pattern?
Within the years earlier than the 2018 Supreme Courtroom ruling, a whole lot of hundreds of thousands of Individuals scratched the itch of sports activities betting by “fantasy” sports activities. These video games allowed clients to choose “groups” of their favourite gamers and win money primarily based on how their gamers carried out. It wasn’t direct playing on sports activities — however it was shut.
And what firm was on the forefront of the fantasy sports activities craze? You guessed it: DraftKings.
The corporate was — and stays — one of many main fantasy sports activities platforms. Now, with the corporate reworking right into a full-fledged sportsbook, it may possibly use its relationship with fantasy gamers to transform them into sports activities bettors.
As of its most up-to-date quarter (the three months ending on Dec. 31, 2023), the corporate reported 7.1 million distinctive clients, up 37% from a yr earlier. Income generated during the last 12 months was $3.7 billion, with quarterly income rising 44% yr over yr.
All this stated, Draftkings will not be a inventory for each investor. For one factor, the corporate is squarely in its formative years cycle. It pays no dividends; it’s unprofitable proper now. Meaning it’s poorly suited to income-seeking traders.
For an additional factor, its enterprise is playing. That makes it a “sin stock,” which means many traders will need to avoid it on ethical grounds.
However, for a lot of different traders, DraftKings is a inventory value contemplating. It’s benefiting from a fast-growing market that ought to proceed to broaden for a few years to return. So, for these open to proudly owning shares in a gaming firm, DraftKings is a reputation to recollect.
Do you have to make investments $1,000 in DraftKings proper now?
Before you purchase inventory in DraftKings, take into account this:
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Jake Lerch has positions in Nvidia. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
