When seeking out stocks with high growth potential, investors should look for a few general things — a reasonable valuation, a strong catalyst, a dominant or growing presence in its market, and excellent financials.
These are just a few of the factors, but it’s a good starting point to look for winners. Here are two stocks that have those characteristics and should break out in 2026 and beyond.
1. DraftKings
DraftKings (DKNG) is in a good position to pop in 2026. The leading online sports betting company has been getting hammered so far this year, down roughly 37% year to date and 52% over the past 12 months.
The sell-off seems a bit overblown and is mainly because the company missed fourth-quarter earnings estimates and had a weaker-than-anticipated earnings outlook for 2026.
But looking ahead, DraftKings has a lot of the characteristics that make it a candidate to pop. For one, it is super cheap, trading at 16 times forward earnings. Overlooked in all the negative attention from its earnings miss is the fact that it became profitable on a generally accepted accounting principles (GAAP) basis for the first time in Q4 — a key milestone. Revenue surged 43% higher in the last quarter, even though it only met estimates.
The catalyst for DraftKings is prediction markets. The company entered the prediction markets business in December, and CEO Jason Robins called it a “massive incremental opportunity” on the Q4 earnings call. The company is investing heavily in it, and Robins said DraftKings is targeting “hundreds of millions in annual revenue” from prediction markets in the years ahead.
Even right away, with its market dominance and new marketing partnerships with ESPN and Universal, DraftKings should see an uptick in revenue from major markets like Texas, California, and Florida, where online sports gambling is illegal, but prediction markets are not.
A big reason for the stock’s slide this year so far is the revenue outlook, which came in below estimates. But revenue from prediction markets was not included in the guidance, so DraftKings could be in a good position to surprise. Analysts certainly think so, setting a median price target of $35 per share, which would be 65% upside over the next 12 months.
2. Booking Holdings
Booking Holdings (BKNG) is the dominant player in the world of online travel sites as the owner of Booking.com, Kayak, Priceline, OpenTable, Cheap Flights, Agoda, and others.
Booking posted strong fourth-quarter results with a 16% increase in bookings and a 16% jump in overall revenue, year over year. It is also executing on its expense reduction plan, which allowed the company to increase net income by 34%, free cash flow by 120%, and expand its net income margin to an industry-leading 22.5%, up from 19.5% and 34.6% on an adjusted basis.
Yet, the stock has been tanking, down about 25% year to date, for a few reasons. One, revenue guidance on a constant currency basis shows a slightly slower pace of growth projected for 2026, and that plays into fears that AI will disrupt the company’s business, essentially making travel services unnecessary.
But analysts like Morgan Stanley, which just raised Booking’s price target, believe that is overblown, as AI travel agents are sending traffic to travel sites like Booking, not handling them directly.
But the concerns have pushed Booking’s stock to near a 52-week low and a very attractive valuation of 21 times earnings.
Also, a huge catalyst for Booking is a long-awaited stock split. The stock is trading at around $4,000 per share and had topped $5,700 per share at its highs. This just-announced 25-for-1 stock split, which takes effect April 2, will bring the share price down to around $160 to $165 per share — making it far more accessible to investors. That often leads to a short-term bump in the stock price.
But Booking is also a good long-term play, especially at this low valuation. It is by far the dominant player in the travel space, is cheap, and is the most efficient with the best financials. Wall Street analysts see it as a consensus buy with a pre-stock split median price target of $5,917 per share, which would be a 53% return.
— Dave Kovaleski
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Source: The Motley Fool