Benchmark Upgrades WWE, Sees Improving Engagement Metrics Ahead

Despite a mixed second quarter, World Wrestling Entertainment, Inc. (NYSE: WWE) is up more than 10% following Thursday's earnings print. WWE’s quarter also inspired an analyst upgrade.

The Analyst

Benchmark analyst Mike Hickey upgraded WWE from Hold to Buy and set a $90 price target for the stock.

The Thesis

In the note, Hickey said WWE’s second-quarter numbers and guidance were good enough to suggest significant upside for the stock.

WWE reported a 5% drop in revenue in the second quarter, including declines in media, live event and consumer products sales. “Raw” ratings were down 14% in the second quarter, while “SmackDown” ratings dropped 11%. The WWE Network subscriber count fell 6%, and North American live event attendance dropped 2%.

“We are now optimistic the firm’s engagement metrics should continue to recover, potentially benefiting from the new distribution agreement with Fox (33% more HHs than USA), WWE Network re-launch, return of talent/reset storylines and new executive leadership at both Raw and Smackdown,” Hickey wrote in the note.

Hickey said upcoming U.S. distribution agreements, $500 million in authorized share buybacks and a multi-month sell-off in WWE shares heading into earnings created a buying opportunity for investors.

Hickey is projecting fiscal 2020 revenue of $1.208 billion on OIBDA of $403 million. Both numbers are below consensus analyst estimates of $1.297 billion and $436 million, respectively.

Hickey said new deals in India and the Middle East and North Africa could be additional catalysts.

Price Action

WWE's stock traded higher by 3.3% to $77.17 on Friday.

Related Links:

WWE Goes Back To The 'Attitude Era' To Try And Freshen Up Sagging TV Ratings

Turner Sports Is Getting Back Into The Wrestling Ring

Photo credit: InFlamester20, Wikimedia