Wells Fargo Sees More Upside For WWE Thanks To 'Raw' And 'Smackdown'

World Wrestling Entertainment, Inc. WWE stock has more than doubled in 2018, but Wall Street sees even more upside ahead if reports about new TV deals are accurate.

The Analyst

Wells Fargo analyst Eric Katz on Friday reiterated his Outperform rating for the stock and raised his price target from $48 to $76.

The Thesis

Katz says early reports from credible sources suggest WWE’s upcoming TV deals for “Raw” and SmackDown” are more bullish than he had hoped for. Katz expected the new contracts could be twice the size of the previous ones, but reports suggest rates could triple over the next five years.

Reports suggest WWE will be getting $265 million per year from NBC parent Comcast Corporation CMCSA for “Raw” and $205 million per year from Twenty-First Century Fox Inc FOXA for ‘SmackDown.” If the numbers are accurate, the combined deals would add $315 million in incremental revenue per year for WWE.

Wells Fargo is now calling for EBITDA of $470 million from WWE in 2020, up from previous estimates of $270 million.

Katz says traders shouldn’t worry as much about the kind of sell-off that resulted in the stock in 2014 when new TV were officially announced.

“At the end of the day - yes, there’s a risk of disappointment, but we think less risk this time as WWE is much better positioned due to demand from more players for its prog. & less uncertainty on subs,” Katz said.