Analyst Insists WWE Is Prime For Sale
Hulk Hogan's signature move might have been the Leg Drop and John Cena may have perfected the Attitude Adjustment, but Needham senior analyst Laura Martin may someday be credited with the Financial Kneecap Whack thanks to a note that proclaims World Wrestling Entertainment, Inc. (NYSE:WWE) is a prime candidate for acquisition.
What Happened: Although speculation over a possible WWE sale has percolated before, it was mostly dismissed as social media rumors. But Martin, offering some of the most withering audacity this side of Piper's Pit, opined the company is on the way to being sold after licensing its U.S. OTT network rights to Comcast Corporation (NASDAQ:CMCSA) Peacock while shopping for a buyer of its international OTT network rights.
"The US OTT rights fees alone generated over 100% of 2020's total OTT Network's revs, so international fees are just gravy, and cutting out all OTT Network costs implies that this new
strategy has much higher ROICs than running a direct to consumer (DTC) business," she wrote in a note.
Martin added that more than three-quarters of WWE's revenue for this will come from "predictable contractually obligated media contracts (generally 5-year deals), aided by WWE's new Peacock deal for WWE's OTT Network rights," noting this gives the company a lower risk profile than other media industry enterprises.
As a result of this situation, Martin theorized, there will be a price tag hanging from the squared circle.
"WWE's large long-term deals clarify for investors the most likely potential acquirers for WWE when it is sold some day, since we believe that WWE is too small to ‘go it alone' in today's streaming industry populated by giant companies," she wrote.
What Else: Complicating matters for investors, Martin continued, were the corybantic bunch over at Reddit who drove up WWE shares during the week of June 7. Share prices went back to their previous level after a week in ascension. Martin berated the "pump and dump" game played by Reddit buyers and warned it would work against WWE.
"If an owner of WWE shares has the stomach to hold through the volatility, there is no long-term damage, but near-term confusion can drive some institutional holders to sell into strength and some don't reenter again after shares return to fundamentals-based levels," she wrote.
Martin maintained a Buy rating on WWE and a price target of $65.
At the close of Tuesday's trading, WWE was up 2.4% at $59.18, sandwiched between its 52-week high of $70.72 and its 52-week low of $35.44.
(Photo: WWE stars Roman Reigns and Cesaro in action. Courtesy of WWE.)
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