WWE Could Be A Big Winner Amid A Fragmenting TV Landscape; Network Has Room For Growth

World Wrestling Entertainment, Inc. WWE stock is up 58.5 percent in 2017, but one Wall Street analyst isn’t ready to tap out on the rally just yet.

The Analyst

JPMorgan analyst David Karnovsky initiated coverage of WWE with an Overweight rating and $37 price target.

The Thesis

According to Karnovsky, WWE still has a favorable risk/reward balance given its upcoming TV contract renewal cycle.

“With unique entertainment assets and global fan appeal, we believe WWE is well positioned to monetize its video content amid a fragmenting media landscape of television networks, distributors, and technology platforms all seeking differentiation,” Karnovsky said Wednesday.

JPMorgan is projecting a 7 percent compound annual revenue growth for WWE over the next three years, and Karnovsky said investors can expect WWE Network subscriber counts to continue to tick higher as the company optimizes and customizes its content.

Karnovsky said tiered network plans are likely coming at some point, and WWE’s transition to an over-the-top content model way back in 2014 puts it ahead of the game as other media companies scramble to catch up.

Karnovsky said both tax reform and potential contract renewals could serve as bullish catalysts for WWE over the next year. Management has kept contract expectations in check, and WWE’s improved brand image and large global presence make it an attractive option for advertisers. He said investors aren’t fully appreciating the company’s opportunities in the U.K. and India as well.

Price Action

Following JPMorgan’s bullish call, WWE stock traded higher by 2.4 percent Wednesday to $29.42.

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Image credit: Miguel Discart, Flickr