Is WWE's Growth Era Down For The Count?

World Wrestling Entertainment, Inc. WWE shares were smacked down on Thursday, falling more than 19% after the company reported disappointing third-quarter numbers.

WWE reported EPS of just 6 cents on $186.3 million in revenue. Earnings came in ahead of consensus analyst estimates of 2 cents per share, but was down from 37 cents a year ago. Revenue came up short of Wall Street expectations of $191.5 million and was down 1.1% from a year ago.

Third-quarter weakness was across the board at WWE, with media, live events and consumer product revenue all missing expectations.

Looking ahead, WWE also cut its full-year 2019 adjusted OIBDA guidance from at least $200 million to a new range of between $180 million and $190 million.

In a statement, co-president George Barrios said the new OIBDA guidance range still represents an all-time record for WWE.

“We continue to believe in WWE’s global growth potential and remain focused on maximizing future opportunities and shareholder value,” Barrios said.

Subscriber Count Falling

One of the more troubling numbers in the report was an average WWE Network paid subscriber count of 1.511 million customers, down 9.2% from a year ago. WWE also projects another 10% drop in Network subscribers in the fourth quarter.

In the earnings call, Barrios said content localization and a tiered pricing system should help rekindle Network subscriber growth.

WWE’s big earnings miss comes the same day the company is hosting its second Crown Jewel event in Saudi Arabia. The event will include the company’s first ever women’s professional wrestling match to take place within Saudi Arabia.

Following the earnings sell-off, WWE shares are now down 34% in the past six months, but some analysts remain optimistic that WWE will get off the mat at some point.

“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,” Morgan Stanley analyst Benjamin Swinburne said earlier this month.

Benzinga’s Take

Given the unprecedented total hours of WWE programming on TV these days, as well as falling income and subscriber numbers, WWE investors are right to be concerned about market saturation. WWE must prove it can continue to penetrate international markets in Saudi Arabia, India and elsewhere and/or it must show it can grow income by better monetizing its existing customers.

WWE's stock traded around $53.75 per share at time of publication.

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

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