Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

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4. DraftKings Inc. (NASDAQ:DKNG)

Share Price Upside: 38%

Number of Hedge Fund Investors In Q2 2024: 96

DraftKings Inc. (NASDAQ:DKNG) is a sports betting company that allows users to play online. As per boutique firm EKG, the firm held a market share of 32% in 2024, which made it the second biggest company in the online betting market after Flutter Entertainment owned FanDuel which held a 35% market share. The two have reaped the benefits of being early movers in a market at a time when online betting regulation was not left up to the states. Given that the third largest online betting service, MGM’s BetMGM, holds an 11% market share, DraftKings Inc. (NASDAQ:DKNG) can enjoy a wide moat in a high margin margin for years to come provided it does not lose market share to FanDuel. Estimates for the firm’s future revenue growth compared to its primary rival are robust, as DraftKings Inc. (NASDAQ:DKNG) is expected to grow revenue by 21% in 2025 which is quite higher than FanDuel’s 12%.

Baron Funds mentioned DraftKings Inc. (NASDAQ:DKNG) in its Q1 2024 investor letter. Here is what the firm said:

“Shares of DraftKings Inc., a leading online sportsbook in the U.S., rose during the quarter following an earnings release that showed strong market share gains and an improved outlook for future profitability. Market share capture has been driven by investment in innovative product offerings that are resulting in strong customer retention. The company also announced the acquisition of JackPocket, a digital lottery courier service. We believe the acquisition will help DraftKings achieve a first-mover advantage in many states that offer the JackPocket service but have not yet legalized online sports betting and casino gaming. DraftKings is well positioned to expand margins and generate positive free cash flow as it grows revenues alongside the rapidly expanding U.S. sports betting market, in our view.”

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