World Wrestling Entertainment Shares Have Hit Rock Bottom
World Wrestling Entertainment Inc. (NYSE: WWE) shares continue to fall almost every single day, and it looks as if there is no end in sight.
The Stamford, Ct.-based company cut its dividend to help shore up its balance sheet, but the company continues to put out a stale product, pay per view buy-rates continue to decline, and the company is losing market share to UFC, and other forms of mixed martial arts in the key 18-49 male demographic.
The company does a solid job of licensing out its entertainers, known as "WWE Superstars" in the form of t-shirts, action figures, video games and the like, but the company generates a majority of its revenue from live gates. Attendance in the United States has been weak for a few years now, as the product has become stale.
The company has had the same two drawers for years now, John Cena and Randy Orton and has not done a good ob of creating new stars or exciting story-lines that fans want to see. As such, the share price reflects it, having fallen nearly 40% in the past year. This compares to a gain of nearly 20% for the S&P 500. Shares are not cheap either at these levels, trading at 1.66 times earnings growth. Shares also trade at 12.70 times forward earnings, not a screaming buy, since shares have fallen 40% in a year.
The company recently elected social media expert Patricia A. Gottesman to its Board of Directors to help the company continue to expand its social media efforts. The company has actually done a decent job of this, participating and extending story-lines on Twitter, Facebook and YouTube.
Aside from a stale product, the company is led by CEO and chairman Vincent K. McMahon. McMahon and his family hold control of the company, thus not allowing any kind of major shakeup from an activist shareholder. It just does not look like there is any sort of change coming in the form of a product, as long as McMahon and family remain in charge of the $700 million company.
Unless the company can duplicate the success it had with past stars such as Stone Cold Steve Austin and The Rock, the company will continue to see its market cap shrink.
That's a body slam investors will not get up from before the 3 count.
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