2 Growth Stocks That Could Skyrocket in 2026 and Beyond

DraftKings is demonstrating strong financial performance, with revenue up 37% to $1.5 billion and adjusted EBITDA surging 134% to $301 million, despite its stock being down due to concerns over unregulated prediction markets. The company, now profitable and generating free cash flow, could see significant upside if these competitors are ruled illegal or if it expands into its own prediction markets. Concurrently, E.l.f. Beauty is poised for substantial growth following its $1 billion acquisition of Rhode, a high-growth brand that E.l.f. plans to scale globally by integrating it into its extensive retail and manufacturing network, leveraging Rhode's strong organic traction and high-margin products to further enhance its attractive valuation.

Analysis

DraftKings (DKNG) has seen its stock decline nearly 40% from highs, driven by concerns over unregulated sports prediction markets, not company performance. Operationally, revenue jumped 37% to $1.5 billion last quarter, with adjusted EBITDA surging 134% to $301 million, reflecting strong engagement and slowing sales and marketing expense growth.

The company is now generating real profits and free cash flow, trading at an attractive forward P/E of 16.7 times 2026 consensus earnings. Key upside catalysts include potential favorable regulatory rulings against competing prediction markets or DKNG's expansion into its own prediction market offerings in new states.

E.l.f. Beauty (ELF) is positioned for substantial growth following its $1 billion acquisition of Rhode, a brand that achieved over $200 million in sales in under three years. Rhode's market traction was evident with $10 million in sales during its first two days at Sephora, capturing 35% of total sales.

E.l.f. plans to leverage its extensive retail network, including Ulta Beauty and Target, and manufacturing capabilities to scale Rhode globally, broadening its product assortment and capitalizing on Rhode's high price points and superior gross margins. With a forward P/E of 31x next fiscal year's estimates and a PEG ratio of 0.5, E.l.f. offers an attractive valuation for its strong growth potential.

Key Decisions for Investors

• Investors should closely monitor regulatory developments concerning sports prediction markets, as favorable rulings could significantly de-risk DraftKings' growth outlook and provide a substantial catalyst.
• Evaluate DraftKings' continued operating leverage and free cash flow generation as indicators of sustained profitability and potential for further valuation re-rating.
• Assess E.l.f. Beauty's integration strategy for Rhode, particularly its success in leveraging existing retail partnerships for global expansion and product line diversification.
• Consider E.l.f.'s attractive PEG ratio and the potential for Rhode's high-margin products to further enhance overall profitability and drive future stock performance.