Analysts Remain Bullish On WWE, Cheer Early Ratings For 'Smackdown' On Fox

World Wrestling Entertainment, Inc. WWE shares are down 26.95% in the past six months as the stock’s TV renewal catalysts have faded and new competition has emerged. However, with the company’s third-quarter earnings report less than a week away, analysts remain bullish on WWE’s longer-term outlook.

Morgan Stanley Weighs In

On Wednesday, Morgan Stanley analyst Benjamin Swinburne reiterated his Overweight rating and $85 price target for WWE.

Swinburne said WWE has simply been struggling to meet high expectations in the past two quarters, but he said little has changed about the company’s fundamental outlook.

“Expectations aside, WWE continues to offer exposure to an asset with unique IP, rapidly growing revenues and FCF, and now at its lowest multiple since late '17,” he wrote in a note.

Morgan Stanley is forecasting high single-digit EBITDA growth for WWE through 2025, and Swinburne said the 2019 sell-off is a buying opportunity.

Since moving to Fox Corp FOX, Swinburne said “SmackDown” ratings have been strong, and Swinburne expects WWE to roll out a premium WWE Network tier sometime in 2020.

MKM’s Take

On Friday, MKM Partners analyst Eric Handler reiterated his Buy rating and $110 target for WWE.

Swinburne said a second WWE Saudi Arabia pay-per-view event and a new USA Network TV deal for NXT in the $60 million range likely mean WWE’s 2019 adjusted OIBDA guidance of at least $200 million is well within range.

“In addition, with 45%+ of revenue locked in through 2024, there are few companies (media or otherwise) which have WWE's financial visibility,” Handler wrote.

Handler said an India TV rights deal has proven more difficult than originally anticipated, but he’s confident an India announcement is coming in the first half of 2020.

Benzinga’s Take

The third-quarter earnings call should give investors their first insight into how well the new Fox programming is performing relative to expectations. Investors will also be watching to see if market competition has driven up talent and production costs in a meaningful way.

The stock traded around $70.26 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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