WWE Investors: Tread Carefully, Stock Can Be 'Brutally Volatile' During Wrestlemania

The road to Wrestlemania has begun. For Wall Street, that means it's the time of year when World Wrestling Entertainment, Inc. WWE is in the spotlight.

Wrestlemania season typically kicks off with WWE's annual Royal Rumble event, which took place on Sunday night. That appears to have excited some traders, as WWE's stock opened the week in the $16.60 handle and hit $18.42 on Tuesday. The stock is up 7 percent so far this week.

"I think some investors are getting long post-Royal Rumble in anticipation of a ramp in WWE Network subs leading up to April's WrestleMania," Macquarie's James Clement told Benzinga on Tuesday afternoon. "In general, the stock has performed pretty well during Q1 in each of the last three years ahead of Mania."

However, Clement had one word of caution: "[T]raders are probably going to be more cognizant of the last two year's WrestleMania selloffs and possibly take profits weeks before the Mania number is ever reported. Retail investors should tread very carefully. This stock can be brutally volatile and probably will be."

Wrestlemania 32 takes place on Sunday, April 3.

Related Link: Why Focusing On WWE's Recent Ratings Struggles Is 'Rather Short Sighted'

The stock hit its all-time high in 2014, toward the end of the Wrestlemania season. The company had just launched its over-the-top digital WWE Network and was also building some anticipation toward a new television contract. The TV deal did not fetch as many bidders or as many dollars as investors would have hoped. The stock soon tanked, famously turning Chairman and CEO Vince McMahon from a billionaire to a millionaire overnight.

"The obvious problem with that trade manifested in each of the last two years – a major sell event around the time Mania's numbers were actually reported, when the company ushers in its seasonally slowly period," Clement continued. "That said, we think it's reasonable to assume that the coming [Wrestlemania] is far more likely to catch a popularity wave during this stretch of time than at any other point in the year."

This year's Royal Rumble featured the "surprise" in-ring return of company stalwart Triple H.

"[W]e thought Creative did a good job with this Royal Rumble, especially in light of injuries to John Cena, Randy Orton and Seth Rollins," Clement said. "[I]t nonetheless sets the company up well for progress in the weeks and months ahead."

The analyst holds a Neutral rating and a 12-month price target of $18 on the stock.