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Wells Fargo Sees More Upside For WWE Thanks To 'Raw' And 'Smackdown'

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Wells Fargo Sees More Upside For WWE Thanks To 'Raw' And 'Smackdown'
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World Wrestling Entertainment, Inc. (NYSE: WWE) stock has more than doubled in 2018, but Wall Street sees even more upside ahead if reports about new TV deals are accurate.

The Analyst

Wells Fargo analyst Eric Katz on Friday reiterated his Outperform rating for the stock and raised his price target from $48 to $76.

The Thesis

Katz says early reports from credible sources suggest WWE’s upcoming TV deals for “Raw” and SmackDown” are more bullish than he had hoped for. Katz expected the new contracts could be twice the size of the previous ones, but reports suggest rates could triple over the next five years.

Reports suggest WWE will be getting $265 million per year from NBC parent Comcast Corporation (NASDAQ: CMCSA) for “Raw” and $205 million per year from Twenty-First Century Fox Inc (NASDAQ: FOXA) for ‘SmackDown.” If the numbers are accurate, the combined deals would add $315 million in incremental revenue per year for WWE.

Wells Fargo is now calling for EBITDA of $470 million from WWE in 2020, up from previous estimates of $270 million.

Katz says traders shouldn’t worry as much about the kind of sell-off that resulted in the stock in 2014 when new TV were officially announced.

“At the end of the day - yes, there’s a risk of disappointment, but we think less risk this time as WWE is much better positioned due to demand from more players for its prog. & less uncertainty on subs,” Katz said.

Price Action

WWE traded higher by 1.7 percent Friday to cross $63 per share. The stock is now up more than 106 percent year-to-date.

Related Links:

WWE Spikes On Reports 'Smackdown Live' Will Move To Fox Following A 'Massive Offer'

WWE Could Be In A Bidding War For 'Smackdown Live' While 'Raw' Gets Big Renewal

Image credit: Miguel Discart, Flickr

Latest Ratings for WWE

DateFirmActionFromTo
Jul 2018Morgan StanleyMaintainsOverweightOverweight
Jul 2018BTIG ResearchMaintainsBuyBuy
Jun 2018CitigroupMaintainsNeutralNeutral

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