What's Next For World Wrestling Entertainment, Inc. (WWE)?
World Wrestling Entertainment, Inc. (NYSE: WWE) capped off its biggest weekend of the year with WrestleMania 34 Sunday night in New Orleans with a card headed by former UFC star Ronda Rousey. The excitement may be over for WWE performers and fans, but analysts say it may be just getting started for WWE investors.
According to KeyBanc analyst Evan Wingren, WrestleMania likely drew 2.05 million viewers on the WWE Network and was the biggest subscriber acquisition event of 2018. Of those viewers, Wingren estimates that about 1.75 million were paid subscribers. In addition, 300,000 of the viewers were likely trial subscriptions, so early reviews of the event on Monday could be important for the company when it comes to converting those trials to paid subscriptions.
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Wingren said trial subscribers are typically difficult to covert and estimates that WWE will average about 1.68 million average paid subscribers in its second quarter.
So far, WWE's popularity has been on the rise this year. After consistent declines in recent years, "Monday Night Raw" viewership is up 3 percent year-to-date. Wingren says online search volume for WrestleMania was in line with previous years heading into the weekend, and KeyBanc estimates that overall fan interest in this year's WrestleMania was likely slightly higher than last year.
While WrestleMania may be the company's biggest show of the year, Wingren says the main event for WWE investors in 2018 is its TV contract renewals. Within the next three to 12 months, WWE will announce its new TV deals for its "Raw" and "Smackdown Live" weekly television shows, and Wingren said it will be the single most important catalyst for WWE stock.
"A rights renewal in line or above our bullish expectations should drive the shares higher and give the company material incremental capital to invest globally in the brand, new content opportunities, or return to shareholders," Wingren says.
Both programs currently run on the USA Network, which is owned by NBCUniversal and is a subsidiary of Comcast Corp. ( CMCSA).
In the longer term, he says WWE's ability to expand its content beyond traditional media platforms will be key to positive market momentum.
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"After the TV rights renewal cycle, other growth at WWE will likely be driven by creation of incremental content for new platforms, advertising revenue from ad-supported viewing across multiple platforms, and modest OTT subscriber growth," Wingren says.
Even after a 70 percent gain in the past year, Wingren remains bullish on WWE stock and anticipates a favorable outcome to the TV contract negotiations.
KeyBanc has an "overweight" rating and $43 price target for WWE stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
