Stock Wars: WWE Vs. Live Nation Entertainment

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector, with the goal of determining which company is the better investment.

This week, the duel is between a pair of global entertainment industry giants readying for a post-pandemic bounce back: World Wrestling Entertainment, Inc. WWE and Live Nation Entertainment, Inc. LYV.

The Case For WWE: Stamford, Connecticut-headquartered WWE can trace its roots back to Capitol Wrestling Corporation in the early 1950s.

The company truly became a pop culture sensation during the 1980s under the World Wrestling Federation banner thanks to a stable of over-the-top personalities pummeling each other in the squared circle, a jolly connection between the company’s talent and music industry star Cyndi Lauper, and a parade of celebrities including Mr. T, Liberace, Muhammad Ali and Andy Warhol adding star power to televised Wrestlemania tournaments.

Fast-forward to 2020 and WWE’s unique brand of musclebound vaudeville found itself facing an existential crisis as the coronavirus pandemic shut down its lucrative live events, thus halting both ticket sales and associated merchandise sales.

During the first quarter of 2020, 41 live WWE events were held across North America before the pandemic lockdowns occurred.

In the midst of this crisis, two situations helped keep it going.

First, Florida Gov. Ron DeSantis ruled in April 2020 that WWE constituted an essential business within the state’s response to the pandemic, thus enabling it to continue television production at its facility in Orlando. Despite the obvious lack of social distancing in its bouts, WWE matches continued without a live audience — the first live event since the pandemic is a “SmackDown” show scheduled for July 16 at the Toyota Center in Houston.

Second, the company announced in January that it was pulling the plug on its streaming video network and transitioning to the Peacock streaming platform run by NBCUniversal, a division of Comcast Corporation CMCSA. Financial terms of the deal were not disclosed, but The Wall Street Journal reported the agreement will run for five years and was valued at more than $1 billion.

In its first-quarter earnings report, WWE was still dealing with the residue of the pandemic: The quarterly revenue was $263.5 million, a year-over-year decrease of 9% from $291 million one year earlier.

Operating income was $65.1 million, an increase of 22% from $55.3 million, and net income was $43.8 million, or $0.51 per diluted share, an increase from $26.2 million, or $0.31 per diluted share, in the first quarter 2020.

WWE opened for trading on Wednesday at $56.44, sandwiched between its 52-week high of $70.72 and its 52-week low of $35.44.

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The Case For Live Nation: This company is the result of the 2010 merger between the concert promotion firm Live Nation and the ticketing sales company Ticketmaster. The merger initially generating controversy, with opponents arguing it would result in higher ticket prices and reduced competition — Bruce Springsteen was among its most prominent opponents — but the union eventually received regulatory approval, with Ticketmaster continuing as a subsidiary of the combined company.

Not unlike the situation with WWE, the Beverly Hills, California-based Live Nation took a painful hit during the pandemic with an 84% revenue decline during 2020. But unlike WWE, which managed to continue with its television operations when live events were forced into cancellation, Live Nation had to wait out the worst of the pandemic and hope that concert venues and the star performers would be back sooner rather than later.

In the company’s first-quarter earnings report, President and CEO Michael Rapino cited a “significant pent-up demand” among post-pandemic audiences, with events selling out faster than normal while summer tours featuring Dave Matthews, Luke Bryan and Maroon 5 are being scheduled.

Still, the situation is hardly back to pre-pandemic levels: The company reported 664 concerts during the quarter, compared to 7,095 in the same period one year ago.

“In the U.S., Bonnaroo, Electric Daisy and Rolling Loud festivals all sold out in record time at full capacity,” Rapino said. “In the U.K., we have 11 festivals planned for this summer, including our largest ones — Reading, Leeds and Parklife — where tickets have already sold out, and in New Zealand, the country’s largest festival, Rhythm and Vines, also quickly sold out.”

During the first quarter, the company reported $290.6 million in revenue, a 79% year-over-year drop from $1.3 billion in Q1 2020. Operating income came in with a $303.2 million loss, compared with a $172.7 million loss one year earlier, and net income registered a loss of $322.7 million, with a basic and diluted net loss per common share available to common stockholders of $1.44.

Live Nation opened for trading on Wednesday at $88.48, closer to its 52-week high of $94.63 than to its 52-week low of $43.46.

The Verdict: Both companies are in very strong need for a turnaround, though perhaps Live Nation has a more pressing situation. WWE’s Peacock deal certainly saved the company from a greater headache, and it is already announcing live event shows across the U.S., but the erratic level around the world of pandemic recovery will complicate the companies’ respective efforts to re-establish their global revenue streams.

WWE carries a peculiar situation of being pegged as an acquisition target, with Needham senior analyst Laura Martin recently insisted it was not a question of if, but when.

"WWE's large long-term deals clarify for investors the most likely potential acquirers for WWE when it is sold some day, since we believe that WWE is too small to ‘go it alone' in today's streaming industry populated by giant companies," she wrote, adding the stock has already experienced monkeyshines from the Reddit apes and their “pump and dump” games that she warned would “drive some institutional holders to sell into strength and some don't reenter again after shares return to fundamentals-based levels.”

Martin’s prediction might be taken with the proverbial grain of salt — rumors of a sale have percolated for years, but WWE Chairman and CEO Vince McMahon has never been the type to throw in the towel when times are rough.

While Live Nation has a more precarious situation due to its dependency on talent and venue availability, particularly outside of the U.S., its stock is closer to its 52-week high than WWE’s stock.

Investors clearly have not lost their faith in the company, and if the stock did not lose serious muscle during the pandemic, one can imagine an even stronger post-pandemic picture.

For this Stock Wars duel, we give the advantage to Live Nation. WWE’s stock should be in a more vibrant position today, especially in view of the Peacock deal.

Cleary, this duel deserves to be revisited by the end of the year after both companies are able to bring their audiences and enjoy a full resumption of their revenue streams.

Photo: WWE star Sheamus; photo courtesy WWE.