Growth stocks can generate sizable gains for their shareholders. The challenge, of course, is knowing what stocks to buy — and when to buy them.
If you have some money you’d like to invest in this wealth-building asset class — that you don’t need for living expenses or to pay off debt — read on to learn about two great growth stocks. You can buy shares in both companies for less than $100 today.
Growth stock to buy No. 1: DraftKings
Profitable investments can often be found in rapidly expanding markets with vast potential for continued growth. Sports betting is one such industry — and DraftKings (DKNG) is the best wager to make on the legalization megatrend.
Widening budget needs are driving more governments to boost their tax revenue by legalizing sports gambling. DraftKings operates sportsbooks in 27 states. It’s also establishing beachheads in promising international markets like Canada, where its sports betting platform is live in Ontario, and the U.K., where it offers daily fantasy sports products.
With potentially lucrative markets like Texas and California yet to legalize sports gambling, DraftKings has a long runway for expansion still ahead. The global sports betting industry could exceed $245 billion by 2033, up from $92 billion in 2023, according to Future Market Insights.
DraftKings has mastered the process of launching its operations in recently legalized areas and quickly attracting new customers. Its revenue rose by 26% year over year to $1.1 billion in the second quarter, driven by a 50% surge in the number of monthly unique payers on its platform, to 3.1 million.
Better still, DraftKings is becoming more profitable as its business matures. When it enters a new market, DraftKings spends heavily to advertise its offerings and acquire new customers. Yet within two to three years, those markets begin to generate profits as the company’s marketing bears fruit, and it begins to scale back its advertising spend.
Management expects DraftKings to produce adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of as much as $1 billion in 2025, up from a projected $420 billion in 2024.
With its earnings set to skyrocket, DraftKings stock looks like a smart investment. The company’s leadership team seems to agree. DraftKings’ board of directors approved a $1 billion share repurchase program on July 30.
Growth stock to buy No. 2: Palantir Technologies
Artificial intelligence (AI) is another clear and powerful growth trend. Palantir Technologies (PLTR) has some of the best machine learning and AI technology on the planet, and business is booming.
Palantir helps businesses and government agencies make better decisions by mining massive amounts of data in real time. By enabling its clients to quickly discover key patterns in their data, the analytics specialist can unlock valuable insights at breathtaking speed.
The U.S. military has long relied on Palantir’s technology. The Central Intelligence Agency was an early backer, and Palantir’s software was reportedly used to help locate Osama bin Laden. Its offerings remain in high demand today. The Department of Defense is licensing Palantir’s AI-powered operating system to bolster its decision-making abilities. This contract alone could be worth up to $480 million for the AI software provider.
Businesses are also deploying Palantir’s Artificial Intelligence Platform (AIP). British oil giant BP, for one, is using Palantir’s AI-driven simulations to make its oil and gas production operations more efficient. For another, Wendy’s is using AIP to prevent waste and automate the ordering processes across thousands of its restaurants.
Moreover, tech titan Oracle recently made AIP available to users of its fast-growing cloud computing services.
“Oracle’s powerful and flexible cloud infrastructure, combined with Palantir’s decision acceleration platforms, helps customers rapidly scale AI capabilities across its operations,” Oracle Vice President Rand Waldron said in a statement announcing the deal in July.
Notably, Palantir is set to be added to the S&P 500 index on Sept. 23, a nod to its impressive profitability and financial fortitude. The AI leader’s revenue and adjusted earnings per share rose by 27% and 80%, respectively, in the second quarter, to $678 million and $0.09. That helped Palantir grow the cash reserves on its fortress-like balance sheet to $4 billion by the end of June.
— Joe Tenebruso
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Source: The Motley Fool