Can buying rock in a bull market help you become a millionaire?

DraftKings (NASDAQ: DKNG)The online sports betting market has been utilized to generate significant returns, with the online sports betting market estimated to be $90 billion in 2023 and expected to reach $180 billion by 2030. This corresponds to the compound annual growth rate (CAGR) of 11%.

However, DraftKings is only one of many options for online sports betting, and its business is largely dependent on the likes and dislikes of politicians in some states that have yet to legalize sports betting. This may make investors wonder if such restrictions will prevent DraftKings from becoming a millionaire stock.

DraftKings' Growth Potential

The stock's history shows impressive growth. Since its IPO via Special Purpose Acquisition Company (SPAC) in April 2020, the stock has risen by more than 1,50%. this includes a decline of 85% during the 2021-2022 bear market. As a result, it has realized an increase of about 1,30% in the last year alone.

To date, this growth has come primarily from the 38 states in the U.S. with current gaming laws. In total, the company offers what it calls "immersive entertainment" in eight countries.

In the DraftKings market, revenues in 2023 are $3.7 billion, representing an annualized growth rate of 641 TP3 T. Adjusted gross margins have also risen to 431 TP3 T, an improvement of 200 basis points (2 percentage points) over the prior year.

In addition, the company's revenue forecast also points to continued growth. In its Q4 2023 earnings report, DraftKings raised its 2024 revenue forecast to between $4.65 billion and $4.9 billion, an increase of $125 million in one quarter.

If the projections hold, this would be an increase of 30% in revenue at the mid-point. It would also bring the adjusted gross margin to 45% to 47%, a further increase of at least 200 basis points.

That said, the stock still trades at a price-to-earnings (P/S) ratio of just under 6. That's not cheap compared to a sales multiple of just over 2 at the start of 2023, but it's well below the stock's earlier P/S ratio, which was as high as 43.

What's holding back growth?

Unfortunately, these improvements didn't prevent an $802 million loss in 2023, which is less than the nearly $1.4 billion loss in 2022. However, the company will spend $1.2 billion on sales and marketing in 2023. While that may help DraftKings in the long run, it's still a huge hurdle to profitability.

In addition.Caesars Entertainment),Pennsylvania Entertainment Company (Penn) (Entertainment) and the Department of Artefacts in the United Kingdom.Flutter EntertainmentOther companies are also competing in this market. Admittedly, DraftKings' online presence has mitigated some of the competition, but it remains a challenge.

In addition, as mentioned earlier, the company's growth potential depends on the political climate of its markets. Although online gaming is prohibited in only 12 states, two of those states are California and Texas, which account for about 70 million of the 340 million people in the United States.

In addition, the road to millionaire status seems to be a tough one for small investors. draftKings currently has a market capitalization of about $21 billion. At this rate, raising a $10,000 investment to $1 million would mean that the company's market capitalization would have to reach 2.1 billion dollars.Trillions of dollarsThe company's growth has been significant, but it is not likely to grow to this extent. While the translation of the addressable market will help the company grow, it seems unlikely that it will grow to this extent.

Is DraftKings a Millionaire Stock?

At the end of the day, DraftKings has the potential to deliver a sizable return. The company's growing revenues suggest that it could gain increasing share in an expanding market, and its relatively reasonable valuation suggests some upside potential.

It's true that, over time, competition and large company losses may slow the growth momentum. But that won't necessarily stop the stock price from rising or make investors significantly richer. Still, small investors shouldn't expect to become millionaires with DraftKings stock alone.

Should you invest $1,000 in DraftKings now?

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Will Healy does not own any of the above stocks.The Motley Fool recommends Flutter Entertainment Plc with the following options: long January 2025 $25 Pennsylvania Entertainment calls and short January 2025 $30 Pennsylvania Entertainment calls.The Motley Fool has a disclosure policy. The Motley Fool has a disclosure policy.

Could This Bull Buy Help You Become a Millionaire? This post was originally published by The Motley Fool.