Will shopping during this bull market help you become a millionaire?

draft kings (DKNG 4.03%) has made significant profits by leveraging the online sports betting market. This market is estimated to be worth $90 billion in 2023 and is expected to reach $180 billion by 2030. This equates to a compound annual growth rate (CAGR) of 11%.

But when it comes to online sports betting, DraftKings is one of many options, and much of its business depends on the whims of politicians, some of whom have made sports betting legal in their states. There are some politicians who haven't. So investors may wonder if these restrictions will prevent DraftKings from becoming a billionaire stock.

DraftKings' growth potential

The stock's history shows significant growth. Since entering the market through a special acquisition purpose company (SPAC) in April 2020, the stock price has increased more than 150%. This figure includes the 85% decline during the 2021-2022 bear market. As a result, we have seen approximately 130% growth in the last year alone.

So far, that growth is largely due to the 38 US states where sports betting has become legal. Overall, the company offers what it describes as an “immersive sports entertainment experience” in a total of eight countries.

Within DraftKings' market, revenue in 2023 was $3.7 billion, up 64% annually. Adjusted gross profit margin also rose to 43%, an improvement of 200 basis points (2 percentage points) year over year.

Additionally, the company's revenue forecasts indicate continued growth. In its fourth quarter 2023 earnings report, DraftKings raised its 2024 revenue guidance to a range of $4.65 billion to $4.9 billion, an increase of $125 million in the first quarter.

If the predictions hold true, you'll see a 30% increase in revenue at the midpoint. Adjusted gross margins will also be in the range of 45% to 47%, an improvement of at least 200 basis points.

Despite this increase, the company's stock is selling at a sales multiple of just under 6 times. This is not as cheap as the sales multiple of just over 2x at the beginning of 2023, but it is well below the initial price of the stock. , when the P/S ratio increases to 43.

What inhibits growth?

Unfortunately, these advances will not prevent a loss of $802 million in 2023, which is smaller than the approximately $1.4 billion loss in 2022. However, the company spent $1.2 billion on sales and marketing in 2023. While that may help DraftKings in the long run, it remains a major hurdle to profitability.

In addition, the following companies: caesars entertainment, pen entertainmentbased in the UK flutter entertainment Compete in this market. Certainly, DraftKings' online presence alleviates some of this competition, but it's still a challenge.

Additionally, as mentioned earlier, the company's growth potential depends on the political climate of the market. Only 12 states have banned online gaming, two of which are California and Texas, which account for about 70 million of the 340 million U.S. population. Failure to persuade these states could limit the company's domestic growth potential.

Moreover, the path to millionaire status looks difficult for small investors. DraftKings' market cap is currently approximately $21 billion.At that rate, to turn a $10,000 investment into $1 million, it means the company's market capitalization would need to reach $2.1 Trillion. Doubling the addressable market would help the company grow, but it seems unlikely it will grow that much.

Is DraftKings a billionaire maker stock?

Ultimately, DraftKings has the potential to generate significant profits. The company's revenue growth indicates it can gain more share in an expanding market, and its relatively reasonable valuation suggests valuations are likely to rise.

Indeed, competition and the company's large losses can slow growth over time. That doesn't necessarily prevent stock prices from rising or investors from becoming significantly richer. Still, small investors shouldn't expect to become millionaires with DraftKings stock alone.