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Analysts Speak Up On WWE's Disappointing Earnings: Could Amazon Step Into The Ring?

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Analysts Speak Up On WWE's Disappointing Earnings: Could Amazon Step Into The Ring?

World Wrestling Entertainment, Inc. (NYSE: WWE) shares stabilized a bit to close out the week after the surprise departure of two top executives, disappointing 2020 guidance and a fourth-quarter revenue miss sent shares tumbling more than 25% over the past two weeks.

On the afternoon of Jan. 30, WWE announced co-presidents George Barrios and Michelle Wilson are leaving the company effective immediately. On Thursday, WWE reported fourth-quarter EPS of 78 cents, ahead of consensus forecasts of 73 cents. However, fourth-quarter revenue of $322.8 million came in well short of analyst expectations of $333.28 million.

In addition, paid WWE Network subscribers dropped 10% in the quarter to 1.42 million.

WWE stock sentiment on StockTwits has taken a major hit in the past couple of weeks. The percentage of messages tagged as bullish for WWE has dropped from 91.6% on Jan. 15 to just 58.8% on Thursday.

 

Several analysts have weighed in on WWE stock following the disappointing earnings report. Here’s a sampling of what they’ve had to say.

WWE Investor Confidence Shaken

Benchmark analyst Mike Hickey said the executive departures rattled investor confidence significantly for the first time since the stock dropped 66% in fiscal 2014 on disappointing Network subscriber growth and TV rights deals.

"Vince MacMahon may encapsulate a thuggish old school CEO, but professional wrestling is coursing through his veins, and WWE offers an investment opportunity with significant upside, in our view," Hickey wrote in a note.

Morgan Stanley analyst Benjamin Swinburne said 2020 guidance reflects disappointing international TV rights revenues.

"We now expect the five international TV deals up in 2019 to be flat relative to the prior agreements compared to our prior estimate of a 1.5x step up," Swinburne wrote.

Strategic Alternatives

Rosenblatt Securities analyst Bernie McTernan said investors should keep expectations low after management said it is pursuing “strategic alternatives” for the WWE Network and a potential “transformative” deal.

"We think the offer would have to be large to offset the $100M to $150M adj. OIBDA we estimate the WWE Network generates in addition to the opportunity cost of losing the customer relationship (i.e. data) and control of their brand globally," McTernan wrote.

Needham analyst Laura Martin speculated that a potential WWE Network streaming deal with Amazon.com, Inc. (NASDAQ: AMZN) could open the door for an Amazon buyout of WWE in the future.

"We believe that such a licensing deal would put AMZN in the best spot to purchase all of WWE, whenever the family is ready to exit," Martin wrote.

WWE Ratings And Price Targets

  • Benchmark has a Market Weight rating and $57 target.
  • Morgan Stanley has an Equal-Weight rating and $50 target.
  • Rosenblatt has a Buy rating and $52 target.
  • Needham has a Buy rating and $55 target.

WWE's stock traded around $44 per hare at time of publication.

Related Links:

WWE's Sell-Off Continues Following Executive Departures, Uncertainty Ahead

Wall Street Slams WWE Following Unexpected Executive Departures

Photo credit: InFlamester20, Wikimedia

Latest Ratings for WWE

DateFirmActionFromTo
Mar 2020BenchmarkDowngradesBuyHold
Mar 2020NeedhamMaintainsBuy
Feb 2020Consumer Edge ResearchUpgradesEqual-WeightOverweight

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