Over The Top? Morgan Stanley Bumps WWE's Price Target To $100

The Heavyweights and Cruiserweights of World Wrestling Entertainment, Inc. (NYSE: WWE) have helped strengthen the stock as an Overweight contender on the Street.

WWE is up more than 130 percent year-to-date, but Morgan Stanley still considers it a buy.

The Rating

Analyst Benjamin Swinburne maintained his Overweight rating and raised his price target from $58 to $100.

The Thesis

Morgan Stanley projects a 10-year compound annual growth rate of 20 percent in adjusted operating income before debt and amortization (OIBDA). That brings the metric near $1 billion in 2028.

“By securing a 3.6x multiple in its new five-year agreements with NBC/FOX relative to its prior five-year broadcast agreement with NBC, WWE gains a massive increase in earnings power, with visibility into the revenue associated with these new rights extremely high,” Swinburne wrote in a note.

He increased his estimates for global renewals in the 2024 and 2025 seasons as well as for 2020 renewals in the U.K. and India, with India lending more upside on higher rights spending. The U.K. may see distribution broaden from pay-TV to free-to-air channels, which could diminish revenue.

In the meantime, Swinburne anticipates an increase in WWE’s investments, particularly in domestic and international content, mergers and capital returns.

“In all cases we would assume WWE's increase in FCF [free cash flow] generation will lead to a new optimal capital structure and likely some leverage,” the analyst wrote.

He projects FCF-per-share to rise from $1 in 2018 to $5 in 2021.

“While we await the outcomes of its smaller UK and India rights renewals, to some extent the match is over as WWE is likely the fastest growing earnings story in our coverage group,” Swinburne wrote.

Price Action

WWE's stock popped more than 5 percent on Morgan Stanley's report but, at time of publication, was trading up about 2 percent at a rate of $76 per share.

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Image credit: Miguel Discart, Flickr