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Citi Raises WWE Price Target Based On Free Cash Flow Outlook

Wayne Duggan

It’s been an exceptional year so far for World Wrestling Entertainment, Inc (NYSE: WWE) stock and its investors, but one Wall Street analyst says there’s still WWE shares deserve their lofty valuation.

The Analyst

Citi analyst Jason Bazinet reiterated his Neutral rating and raised his price target for WWE stock from $69 to $95.

The Thesis

According to Bazinet, WWE is a play on two of the biggest trends in media today--sports content and cord-cutting. Bazinet compared WWE to Formula One and said both companies are in prime position to deliver major cash flow growth in coming years.

Bazinet said WWE’s new TV deals for “Raw” and “SmackDown” announced earlier this year have provided clarity for WWE’s cash flow through 2024. WWE’s two new deals with Comcast Corporation (NYSE: CMCSA) subsidiary NBCUniversal and Twenty-First Century Fox Inc Class A (NASDAQ: FOXA) were a combined 3.6 times the size of its previous TV deal.

Bazinet said Citi’s new higher price target applies a 2020 estimated free cash flow multiple of between 17 times and 20 times to WWE stock, roughly in-line with Formula One’s 25 times multiple.

“We ascribe a lower multiple to WWE as Formula One’s licensing renewal cycle still lies ahead,” Bazinet said.

While WWE’s financial future seems set for now, Formula One’s new deals could potentially generate FCF upside.

Price Action

WWE traded higher by 1 percent to $83.12 following the bullish commentary. Thanks to the new TV deals, the stock is now up 172 percent in the past year.

Related Links:

Wells Fargo Sees More Upside For WWE Thanks To 'Raw' And 'Smackdown'

WWE Spikes On Reports 'Smackdown Live' Will Move To Fox Following A 'Massive Offer'

Photo credit: GabboT, Flickr

Latest Ratings for WWE

Date Firm Action From To
Aug 2018 Citigroup Maintains Neutral Neutral
Jul 2018 Morgan Stanley Maintains Overweight Overweight
Jul 2018 JP Morgan Maintains Neutral Neutral

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