JPMorgan Sees 20% Upside For WWE, Multiple 2019 Catalysts

For the second time in a week, World Wrestling Entertainment, Inc. WWE received some major love from Wall Street.

The Analyst

JPMorgan analyst Dan Karnovsky upgraded WWE from Neutral to Overweight and raised his price target from $84 to $87.

The Thesis

Karnovsky said the roughly 26-percent pullback from all-time highs in recent weeks was an excellent buying opportunity for long-term WWE investors. He said after a huge run this year, the stock is still trading at a modest valuation premium to its historical levels, but there's a fundamental explanation for that premium.

“WWE has greater visibility into multi-year OIBDA growth and capital returns, driven by step-ups and escalators on US TV contracts, with upside from international agreements, mainly in India,” he wrote.

India renewals were the primary reason Guggenheim analyst Curry Baker reiterated his Buy rating for WWE earlier this week and raised his price target from $100 to $105.

Karnovsky said declines in live attendance and merchandise sales may be driving some of WWE’s recent weakness, but he says the upcoming shift of "Smackdown Live" to Twenty-First Century Fox Inc FOX FOXA will likely be a bullish catalyst for the stock.

Near-term positive catalysts in 2019 include the India renewal, re-tiering of the WWE Network, updated long-term guidance, and potential capital return increases. In the longer term, Karnovsky said higher returns on the WWE Network, the addition of new sponsors and any new partnership contents will also help drive revenue growth.

Price Action

WWE traded higher by 5.4 percent Friday to $76.05 per share and is now up 148.5 percent year-to-date.

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Photo credit: Miguel Discart, Flickr