Fitch Ratings assigned DraftKings Inc. a first-time 'BB+' Long-Term Issuer Default Rating (IDR) with a Stable Outlook. Additionally, Fitch rated the company's senior secured debt 'BBB-' with a Recovery Rating of 'RR1' and its senior unsecured convertible notes 'BB+'/'RR4'.
The 'BB+' IDR reflects DraftKings' leading market position in a growing industry, its conservative financial structure, and a robust free cash flow profile. These strengths are balanced against the company's significant exposure to the volatile online sports betting segment and intense industry competition.
Fitch forecasts high revenue growth and margin expansion, expecting EBITDA leverage to reach low 1x by 2026. The rating agency anticipates that robust cash generation will allow DraftKings to repay its convertible notes with cash in 2027, further reducing leverage and supporting shareholder returns through share buybacks.
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