Forget 2025: These 2 Growth Stocks Could Soar in 2026

DraftKings shares slid 8% in 2025 and finished 35% below their 2025 peak amid slowing growth and new entrants in prediction markets such as Kalshi and Polymarket, but the company’s strong consumer brand and promotional partnerships with NBCUniversal and ESPN — alongside roughly half of revenue from casino-style gaming — are cited as durable competitive advantages. Recursion Pharmaceuticals, which uses an AI-driven drug discovery platform (Recursion OS) leveraging ~65 petabytes of data, saw a 44% pullback in 2025 but could prove its model in 2026 as one drug update and two Recursion-discovered drugs enter phase 1 trials; analysts forecast revenue rising to $83 million in 2026 from an expected $63 million in 2025, which should materially reduce losses if realized. Investors should weigh these potential catalysts against ongoing execution risk and volatility.

Analysis

Market structure: DraftKings (DKNG) retains asymmetric advantages via ESPN/NBC reach and a diversified mix (casino ~50% of revenue) that should protect pricing power versus niche prediction platforms (Polymarket/Kalshi). Those entrants chiefly pressure margins in low-acquisition cohorts but are unlikely to displace branded distribution channels in 12–24 months; expect single-digit market-share churn, higher promo spend, and elevated marketing CAC near-term. Recursion (RXRX) sits in a different market dynamic: its Recursion OS converts fixed data scale (65 PB) into preclinical funnel efficiency, creating optionality for recurring partner milestones and licensing revenue if 2026 phase-1 starts and a scheduled update meet expectations.

Risk assessment: Tail risks include state/federal regulatory backlash to prediction markets (weeks–months), FDA setbacks or reproducibility failure for RXRX (binary, quarters), and media-contract underperformance for DKNG (quarterly). Immediate impact (days) will be higher implied volatility in options; short-term (3–6 months) hinges on Q1 ARPU and registration trends for DKNG; long-term (12–24 months) depends on RXRX hitting analyst revenue targets (~$83M 2026 vs $63M 2025) and converting milestones to cash. Hidden dependencies: RXRX revenue is partner-milestone concentrated; DKNG scale relies on advertising/TV integration execution.

Trade implications: Direct: establish a tactical long in RXRX equal to 1–2% NAV via calendar call spreads with 9–12 month expiries to capture phase-1/2026 revenue catalysts while capping premium. For DKNG, take a 1–2% constructive position funded by selling 3–6 month OTM calls (covered or call-spread) to harvest elevated implied vol and buy downside protection (3–6 month puts) if ARPU or registration growth misses by >5% QoQ. Pair trade: long DKNG vs short PENN (or gaming ETF) sized 1:1 to isolate brand/marketing premium; rebalance if spread widens >15%.

Contrarian angles: The market underweights RXRX’s potential to monetize platform-as-service fees and recurring partnerships — treat 2026 as a de-risking window where successful phase-1 initiations can re-rate multiples by 30–50% if milestones convert to bookings. Conversely, DKNG’s ~35% drawdown already prices in aggressive share loss; a stabilization in ARPU within +/−3% over two consecutive quarters should trigger adding exposure. Watch for unintended consequences: regulatory squeeze on prediction markets could bolster incumbents or create cross-market contagion; monitor state-level bills and two key RXRX trial readouts within 6–12 months as binary movers.

Key Decisions for Investors

• Establish a 1–2% NAV long position in RXRX using a 9–12 month call spread (buy 12–18 month ATM call, sell higher strike) to capture upside from phase‑1 starts and the 2026 revenue inflection; close or roll if milestones miss or if cash runway deteriorates by >25% in next 6 months.
• Add a 1–2% tactical long to DKNG funded by selling 3–6 month OTM covered calls (or call spreads) and simultaneously buying 3–6 month 5–10% OTM puts as hedge; trim longs if quarterly ARPU falls >5% QoQ or if registration growth decelerates for two consecutive quarters.
• Implement a pair trade: long DKNG vs short PENN sized to net neutral beta to broader US consumer discretionary (approx 1:1 notional), target spread compression of 10–15% within 6–12 months; unwind if spread moves against you >20% or upon major regulatory announcements.
• Reduce passive growth exposure by 3–5% reallocating into media/advertising beneficiaries (DIS, CMCSA) that gain from sportsbook distribution deals; monitor 30–90 day activation metrics (ESPN audience integration KPIs and NBC ad CPM lift) and redeploy if LTV:CAC improves >10%.