Earnings season is now starting to fade in the rearview mirror, and it was a mixed offering for growth investors. Thankfully there were plenty of names that lived up to and exceeded the hype. I want to look at two of the faster-growing stocks that impressed me this season.
DraftKings (DKNG -2.31%) and Celsius Holdings (CELH -1.62%) came through with impressive financial results earlier this month, and you don't need a lot of money to get started in these industry disruptors. Here's why I think that these are some of the stocks you may want to consider with your next $2,000 investment.
DraftKings
Shares of DraftKings have more than doubled in 2023, up a hearty 117% year to date. A "double or nothing" bet on the online sports wagering player and fantasy sports leader is paying off. DraftKings has come through with better-than-expected results and raised guidance as it expands its territorial reach in this promising niche for those who can stomach the regulatory risks of sports betting stocks.
Bears will argue that it's easy to double after losing more than half of your value the year before. DraftKings stock is trading just below where it was at the start of 2022, when it would go on to surrender 59% of its value. After years of accelerating top-line growth, revenue finally started to slow last year.
- 2018: 18%
- 2019: 43%
- 2020: 90%
- 2021: 111%
- 2022: 73%
It also didn't help that DraftKings posted its third consecutive year of 10-figure losses. It's not a good look to be losing so much money in a game where the house is supposed to always win. However, things are starting to look good for those betting on DraftKings in 2023.
Image source: Getty Images.
DraftKings posted encouraging financial results earlier this month. Revenue soared 84% to $770 million in the first quarter, comfortably ahead of the 69% growth that analysts were targeting. This follows a 34% year-over-year increase it posted in the prior year's first quarter, building on the 81% surge it posted in the final quarter of last year.
The online betting leader is only expecting 40% to 44% in revenue growth for all of 2023, but let's double down with a pair of silver linings. DraftKings wasn't as optimistic when it initiated its full-year guidance six months ago, looking at a 33% top-line boost in 2023. It has raised its growth projections in back-to-back quarters. The other silver lining is that 40% to 44% growth is in line with the pace it was scoring in 2019. DraftKings will be growing its revenue nearly tenfold this year compared to where it was four years ago, and it's still running at a healthy and improving clip.
The news is also impressive as it tackles its problematic lack of profitability. The red ink slowed for DraftKings in its latest quarter, and it has consistently beaten Wall Street estimates on the bottom line over the past year. Its customer acquisition cost has declined by 27% as engagement improves, a potent combination. Losses will continue, but DraftKings' leaner outlook for its adjusted EBITDA deficit in 2023 is less than half of what it generated last year.
At least 13 analysts raised their price targets on DraftKings following its blowout quarter, and this week is off to a promising start with UBS upgrading the shares on Monday. Betting on DraftKings is getting a lot easier to justify despite the stock already more than doubling this year.
Celsius
If you think 84% growth at DraftKings is fast, hand the baton in the second leg of this relay race to Celsius. The company behind the sparkling energy drinks that help improve a body's metabolism to burn more calories saw its revenue skyrocket 95% to $290 million through the first three months of this year. Analysts were expecting a 64% advance.
Stateside revenue more than doubled, doubling its share of the country's energy drink market to 7.5%. There's optimism for Celsius to duplicate its success overseas now that beverage giant PepsiCo is on board as both a distribution partner and an investor. PepsiCo invested $550 million for an 8.5% stake in Celsius last summer.
Unlike DraftKings, Celsius is already profitable. The $0.40 a share in net income was twice as much as what Wall Street pros were modeling. Like DraftKings, the revenue bursts should slow as the year plays out. The runway is still long for Celsius to deliver years of growth that is several times the pace of the historically sleepy beverage stocks market. Put another way, this provider of canned fizz isn't likely to go flat anytime soon.
