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World Wrestling (WWE) on Fire: What is Driving the Stock?

Zacks Equity Research

Of late, the Movie/TV Production/Distribution industry has emerged as a favorite with the investors. This is quite evident from the industry’s sharp gain of 24.5% in the past three months. World Wrestling Entertainment, Inc. WWE, which belongs to the aforementioned industry, has benefited from the trend with the stock gaining 39.2%. Stocks such as IMAX Corporation IMAX, Twenty-First Century Fox, Inc. FOXA and Lions Gate Entertainment Corp. LGF.A, have also witness upsides of 20%, 26.6% and 3.4%, respectively.

The bullish run of WWE may have aroused your curiosity but it is the factors that demands have your attention. Let’s delve deep and find out more.

Revenues Continue to Surge

The year 2016 registered record revenue generation in the history of WWE. The company’s record revenues primarily came on the back of substantial increase in revenues in North America, Europe/Middle East/Africa (“EMEA”) and gain in WWE Network’s total subscriber base. The company has carried the momentum of 2016 in to 2017, with the first, second and third quarter witnessing revenue growth of 10%, 8% and 13.5%, respectively.

Further, analysts polled by Zacks expect sales increase of 7.9% for 2017, higher than the industry’s growth estimate of 7.2%.

Strategic Efforts Bode Well

We believe WWE will continue to report record revenue growth as it has not only extended its previous deal with different companies but also signed agreement with new service provider for airing its flagship program Raw and SmackDown in different countries. The strong relationship between WWE and Groupe AB is set to continue into the 18th year with both companies extending the partnership.

In the long haul, the company will continue banking on WWE’s content distribution agreement. Recently, the company stated that distribution agreement, which generated a large chunk of television rights revenues, will expire in 2019 in some regions. Licensing of Raw and SmackDown in the United States will terminate in Sep 30, 2019, while in the UK and India it will expire on Dec 31, 2019. The company is looking to renew the distribution agreement in these regions somewhere between May 2018 and first-half 2019.

Further, in an effort to augment revenues WWE reached an agreement with sports marketing agency Lagardère Sports, which will facilitate it to acquire international sponsorship. Per the agreement, Lagardère Sports will help in building partnership portfolio through its sponsorship proficiency and global sales channel in all international regions, excluding China. We believe with increasing subscription based video streaming services WWE Network through its vast presence in over 180 countries will aid top-line growth. Revenues from international sponsorship increased 29% in the first nine months of 2017 due to joining of blue-chip advertisers such as KFC, Nestlé, AT&T and other gaming partners.

OIBDA View Looks Encouraging

Management is optimistic about achieving another great year of revenues and adjusted OIBDA growth. For 2017, the company is targeting adjusted OIBDA in the band of $108-$112 million, up from the prior estimate of $100 million. For the fourth quarter, adjusted OBIDA is projected in the range of $31-$35 million buoyed by top line growth, WWE Network subscribers and contractual television rights fees. For 2018, management is optimistic about achieving another great year of revenues and adjusted OIBDA growth. The company anticipates adjusted OIBDA of at least $115 million.

WWE currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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World Wrestling Entertainment, Inc. (WWE) : Free Stock Analysis Report
Twenty-First Century Fox, Inc. (FOXA) : Free Stock Analysis Report
Imax Corporation (IMAX) : Free Stock Analysis Report
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