Why WWE Network Is 'Clearly' A Viable Business

FBN Securities came out with a note on World Wrestling Entertainment, Inc. WWE on Thursday. The firm initiated coverage on the stock with an Outperform rating with fair value of $25.11 per share, which represented 32.6 percent upside from Wednesday's closing price.

FBN said, "In short, we feel WWE is worth a look - especially by deep value investors given the quarterly dividend, the strength of management, the uniqueness and high barriers to entry tied to the company’s business lines and the strength of the balance sheet."

Shares of WWE were up as much as 10 percent on Friday. Nearing the close, the stock traded up 8.5 percent at $20.89.

Viable Business

FBN praised the WWE Network for its unique content and entry into other emerging markets. On Friday, the WWE Network launched in India, which has become a big market for the company and other wrestling organizations.

"Because historically most of WWE’s high margin revenue stemmed from its 12 annual PPV events, launching the WWE Network on February 24, 2014 was viewed by many investors as risky, leading many to question WWE’s future profitability," the FBN note said. "Although this thinking was understandable upon launch given that a WWE Network subscription provides access to all PPV events, we note WWE’s 'Network Segment' revenue as of last report is now higher than stand-alone PPV revenues ever were on a trailing 12 month basis, a fact that should mitigate investors original fears and concerns."

This leads FBN to declare the WWE Network as a "a viable business with longevity."

"Due to the operating leverage inherent in the OTT model, in the long run its existence should prove better for shareholders and fans alike as subscription based businesses tend to have more visibility going forward than PPV ever did or could," they said.

WWE on Thursday declared a $0.12 quarterly dividend.

More Live Programming?

There have been rumors circulating that WWE's "Smackdown" program could switch from a taped to live show format, just like the company's flagship show "Monday Night Raw."

"Smackdown" has seen some low viewership ratings recently, but could a live format help that out?

Horizon Media Research Director Brad Adgate told Benzinga that live TV is typically better than tape and that USA Network usually delivers higher rating than SyFy. The show has been on SyFy since 2010; before that, it was broadcast on a host of network TV stations. The show will switch to USA Network early in 2016.

Brian Sozzi, a correspondent for The Street and long-time WWE fan, told Benzinga that live programming may cost more, but "WWE just needs some better storylines."