How WWE Could Further Monetize NXT Following TV Deal

World Wrestling Entertainment, Inc. WWE shares traded higher by another 4% on Tuesday after the company announced a new TV deal for its NXT brand to air a two-hour weekly show on Wednesday nights. Ahead of the official announcement, one analyst said there’s plenty of upside remaining for WWE.

The Analyst

MKM Partners analyst Eric Handler on Monday reiterated his Buy rating and $110 price target for WWE.

The Thesis

Handler said current Wall Street forecasts don't include what he estimates as between $50 million and $100 million in additional annual revenue from the NXT TV deal at an EBITDA margin of around 65%. Although WWE didn't disclose the financial terms of the deal, Handler estimates the deal could be worth roughly half the $1.9 million per hour Comcast Corporation CMCSA and Fox Corp FOX FOXA are paying for “Raw” and “SmackDown.”

NXT is often referred to as the company's developmental brand -- a place where younger wrestlers can train and work on developing their characters before being "called up" to "Raw" or "Smackdown."

In addition, Handler says WWE has additional opportunities to further monetize the NXT brand, including raising the number of annual NXT pay-per-view events from five to as many as 12.

“We anticipate WWE management could look to further monetize the NXT brand with international TV deals either through pay-TV or free to air networks,” Handler wrote in a note.

Depending on the terms of the deal, Handler said it could be valued at between $5 and $10 per WWE share, especially if Fox was also bidding for the deal.

Price Action

After Tuesday’s jump, WWE shares are up 8.4% from last week’s close, trading around $74.70 at time of publication.

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