High-growth stocks have been crushed in late 2021. Unfortunately, early trading in 2022 does not seem to provide a reprieve. However, the downturn has created massive opportunities for long-term investors. I believe now is a good time to consider accumulating growth stocks at reduced valuations. One stock to consider owning is DraftKings (NASDAQ:DKNG).
The stock has seen its valuation cut by about 75% since its March 2021 highs. There is still plenty of reasons to be optimistic for DraftKings’ future despite the massive losses incurred by DKNG stock.
First Mover in a Large Market
One of these reasons for optimism is the company’s legalization victory in New York. It was announced in November of last year that New York had moved to legalize online sports betting. It now joins only 18 states in the country that have done so.
This was a major win for DraftKings as it was one of only nine operators approved in the state. These operators were given 10-year licenses by the New York State Gaming Commission effectively giving them a monopoly in the state. Therefore operators would not face any competition in the near term. In other words, DraftKings would have a head start in this market.
The New York gambling market is so large that there are more than enough customers for these operators. Thus limiting the need for large promotions and freebies allowing operators to be more profitable at the onset. As one of the initially approved operators, DraftKings would have a presence in New York in the years to come.
New York Betting Market Dazzles
According to analysts from Macquarie, online sports betting could hit $1 billion in annual revenue. This large potential market size is not surprising.
With a population of nearly 20 million and the crown jewel of New York City, the state had always been a “big catch” for the industry.
Macquarie states “We believe New York represents one of the most attractive sports betting states given its population, wealth/income, and sports culture”
The initial results of legalized betting in New York have been nothing short of spectacular. In the first two weeks, New York sportsbook took more than $600 million worth of bets. Draftkings had been one of the four currently operating and took home $134.7 million.
If these trends continue, the total haul in New York could exceed more than $1 billion month’s end. This is a massive opportunity for Draftkings to continue building its brand in the state.
I believe it will only be a matter of time before New York would surpass New Jersey as the nation’s leading sports betting market. The fact that DraftKings has a foothold in this crucial market is good news for investors of DKNG stock.
These results in New York are just the beginning of what could be a wave of growth for the online sports betting market. Other states are strongly considering legalization and regulation as well.
I am convinced that there is a lot of momentum legislatively on this issue given the tax dollar implications. Sports betting legalized across the US would be a massive win for the industry.
Draftkings has demonstrated its ability to quickly capitalize on these types of opportunities. With the company’s national reach and technology, it could replicate this success in other markets as well. This could mean that Draftkings can get a “first-mover” advantage in other states that legalize.
DKNG stock has taken a beating due to macroeconomic concerns about inflation. However, this doesn’t reflect the true situation of Draftkings. The company continues to fire on all cylinders as it executes its expansion plans. I would consider accumulating DKNG stock while it is selling at such a discount.
On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.