2 Growth Stocks That Could Skyrocket in 2026 and Beyond

DraftKings (DKNG) and E.l.f. Beauty (ELF) are identified as growth stocks with significant upside potential. DraftKings, despite recent stock underperformance, reported robust Q3 revenue growth of 37% to $1.5 billion and a 134% surge in adjusted EBITDA to $301 million, signaling a strong pivot to profitability and operating leverage, with its 2026 forward P/E of 16.7x suggesting an attractive valuation amidst potential regulatory tailwinds. E.l.f. Beauty's strategic $1 billion acquisition of the rapidly growing Rhode brand, which achieved $10 million in sales during its initial Sephora launch, is expected to drive substantial global expansion by leveraging E.l.f.'s established retail and manufacturing infrastructure, while its 0.5 PEG ratio points to an undervalued growth trajectory.

Analysis

DraftKings (DKNG) has demonstrated a significant operational turnaround, reporting a 37% year-over-year revenue increase to $1.5 billion last quarter and a 134% surge in adjusted EBITDA to $301 million. This indicates a successful pivot from heavy customer acquisition to generating real profits and free cash flow, driven by robust engagement and expanding gross margins from same-game parlays.

Despite a nearly 40% stock decline year-to-date, attributed to concerns over unregulated prediction market competitors, DraftKings maintains leadership in regulated online sports betting. Potential regulatory action or a court ruling could eliminate these competitors, significantly benefiting DKNG. Trading at an attractive forward P/E of approximately 16.7 times 2026 consensus earnings, the stock appears undervalued given its rapid growth and increasing operating leverage.

E.l.f. Beauty (ELF) is poised for accelerated growth following its strategic $1 billion acquisition of Rhode, a brand that achieved over $200 million in sales within three years with minimal marketing. Rhode's recent Sephora launch generated an estimated $10 million in sales in its first two days, capturing 35% of Sephora's total sales for that period, highlighting its strong organic traction.

This acquisition allows E.l.f. to leverage its extensive retail network and manufacturing capabilities to expand Rhode's global distribution and product assortment, enhancing overall growth with Rhode's high price points and superior gross margins. E.l.f. Beauty's valuation, with a forward P/E of 31 times next fiscal year's estimates and a PEG ratio of 0.5, suggests it is currently undervalued.

Key Decisions for Investors

• Investors should closely monitor regulatory developments concerning prediction markets, as a favorable outcome for DraftKings could significantly enhance its market position and valuation
• Consider DraftKings' current valuation of 16.7x 2026 P/E as potentially attractive given its strong operational leverage and successful pivot to profitability
• For E.l.f. Beauty, assess the successful integration and global expansion of the Rhode brand, particularly its rollout through E.l.f.'s established retail channels like Ulta and Target
• Evaluate E.l.f. Beauty's growth potential and attractive PEG ratio of 0.5, which suggests an undervalued growth stock, especially considering the high-margin contribution from Rhode