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How Much Damage Could The Coronavirus Have WWE's Live Event Business?

Wayne Duggan

So far, 2020 has been a brutal year for stock investors, but some stocks have been hit much harder than others. Even prior to the coronavirus outbreak, the year was off to a disastrous start for World Wrestling Entertainment, Inc. (NYSE: WWE).A guidance cut and the surprise departure of two top executives has created uncertainty surrounding the company’s near-term financial outlook.

But WWE also has unique exposure to COVID-19 given its biggest event of the year, WrestleMania 36, is less than a month away.

WWE Company Updates

On Thursday, WWE withdrew its first-quarter and full-year guidance, citing the negative impacts of the coronavirus.

“It should be noted that the Company may be directed to cancel, postpone or relocate certain upcoming events and the number of these changes is unknown at this time,” WWE said in a statement.

Up to this point, WWE has not cancelled WrestleMania, but the company said it's working closely with local officials and monitoring the situation.

“While we remain committed to hosting WrestleMania at Raymond James Stadium on Sunday, April 5, we are putting contingency plans in place in the event that it is cancelled by government officials, civil authorities and/or local venues,” the company said.

In a worst-case scenario, WWE may be forced to cancel or postpone WrestleMania and all its other live events until the coronavirus situation dies down. CEO Vince McMahon’s XFL cancelled the remainder of its season earlier this week, one of many professional and collegiate leagues to do so.

WWE's Potential Financial Impact

There’s no way to easily quantify the type of negative impact WWE live event cancellations might have on WWE Network subscriptions. However, WWE breaks down its live event revenue in its quarterly reports.

Looking back at the second quarter of 2019, WWE reported $268.9 million in net revenue for the quarter, which included WrestleMania. Of that $268.9 million, $48.8 million (18.1%) came from live events.

Live events had a much larger impact on operating income. WWE reported $17.1 million in operating income in the second quarter of 2019, and $12.4 million (72.5%) came from live events.

Benzinga’s Take

As investors brace for news of a potential cancellation of WrestleMania 36 and all other WWE live events, the silver lining at this point for investors may simply be how far WWE shares have already fallen. The stock is down 24.3% year-to-date and 63.2% overall in the past year, and much of the near-term risk to its live events may already be priced into the stock.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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