WWE Is Still A Heavyweight; KeyBanc Upgrades Stock Ahead Of TV Renewal Cycle

World Wrestling Entertainment, Inc. (NYSE: WWE) stock has been on a tear in the past year, and the company may face difficulties in expanding its WWE Network subscriber count in the future. However, one analyst says investors shouldn’t be scared to take a chance on WWE stock.

The Analyst

KeyBanc analyst Evan Wingren upgraded WWE from Sector Weight to Overweight and set a $43 price target for the stock.

The Thesis

WWE’s TV renewal cycle could be a major positive catalyst for the stock, according to Wingren. KeyBanc estimates WWE’s 2020 revenue will be $936 million and OIBDA will be $255 million. Those new projections include a 30 percent increase in television revenue following major renewals in the next couple of years. Wingren estimates WWE’s revenue per TV hour for "Raw" and "Smackdown" will increase from about $1.2 million in 2019 to about $1.5 million in 2020.

WWE Network subscriber growth has slowed significantly from around 25 percent in Q3 2016 to only 3 percent in Q1 of 2018. However, Wingren says the fundamentals of the WWE brand have improved and the global demand for video, social and gaming content could really help the company’s bottom line.

WrestleMania in April could, as always, be a near-term catalyst for the stock.

“More importantly, WWE expects to announce the results of its U.S. TV renewal between May and September 2018, which, when announced, will likely be extrapolated for other expiring TV contracts given its importance,” Wingren wrote.

Price Action

WWE stock is up 70.9 percent in the past six months. The stock traded higher by 2.7 percent to $35.81 Monday morning.

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Image credit: Miguel Discart, Flickr