Booking The Territory: 4 Reasons Why BTIG Sees More Upside For WWE

Shares of World Wrestling Entertainment, Inc. WWE have more than tripled in value over the past year the case for even more upside can be justified, according to BTIG.

The Analyst

BTIG's Brandon Ross maintains a Buy rating on World Wrestling Entertainment with a price target lifted from $75 to $92.

The Thesis

Investors have multiple reasons to remain confident the surge in WWE's stock can sustain itself, Ross said in a note.

Brand Image

WWE's brand image has notably improved among not only consumers but industry peers, partners and advertisers. With the support of its partner NBCUniversal, the entertainment company has been able to convince "top shelf advertisers" it's now a quality destination to advertise on. The company can now count on additional support from its new broadcast partner Twenty-First Century Fox Inc FOXA, which is likely to heavily promote WWE during its Sunday and Thursday night sports programs.

Spending

Some investors are concerned with how much WWE is going to reinvest in its business after its recent contract renewal, the analyst said. The company is likely looking to invest in data and technology and create localized content and a $50 million estimate is likely aggressive. If the company realizes even a small return on its investment, it would warrant a higher stock multiple.

Dividends, Buybacks

WWE should generate "significant" free cash flow in 2020, which is the first full year of its new TV deals, Ross said. Specifically, the company could realize $380 million in free cash flow which would represent a 6 percent yield. This will likely support a "robust" capital return program of around $150 million in annual dividends and $300 million in annual share buybacks.

Global Expansion

WWE's international prospects remain encouraging as the company should be able to reach new agreements in three of its top seven markets over the next few months, the analyst said. While it may difficult to quantify the outcome of every market, WWE will likely take full advantage of the "exploding" global market for original content.