Roku and DraftKings: Overlooked Stocks Ready for Growth

Roku and DraftKings may be poised for gains in 2025. Roku's growing households and improved margins signal potential growth, while DraftKings boasts strong revenue growth and projected free cash flow improvements.

Date: 12-01-2025

AI Rating: 7

Stock Performance Overview

The S&P 500 experienced a significant rise of 25% in 2024; however, certain growth stocks such as Roku and DraftKings have not matched this performance, despite their underlying business growth.

Roku Analysis

Roku's performance could positively impact its stock price due to several factors. The continual growth in the number of households using its platform at a double-digit rate is notable. In the last quarter, the number of streaming households grew 13% year over year, reaching over 85 million.

Moreover, Roku's revenue reflects robust performance. The total platform revenue increased by 15% year over year, totaling $908 million. This growth indicates strong demand for streaming services, making Roku attractive at lower price levels.

Another critical factor is the improvement in Roku's profit margins. The gross profit margin improved from 48.1% in Q3 2023 to 54.2% in Q3 2024, demonstrating effective management strategies to enhance profitability.

DraftKings Analysis

DraftKings appears favorably positioned within the expanding online sports betting market. Revenue increased by 39% year over year, reaching nearly $1.1 billion, and is projected to continue growing at approximately 31% in 2025. The positive revenue trajectory suggests that DraftKings is well-poised for further gains.

Furthermore, the anticipation of free cash flow reaching around $850 million in 2025 points to improving profitability. This metric is significant as it reflects DraftKings' capacity to generate cash from operations, which is a positive indicator for investors.

In summary, both Roku and DraftKings show substantial growth indicators that may lead to positive reactions in their stock prices moving forward, based on improving margins, growing revenues, and a favorable market environment.

Stocks: ROKU DKNG