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World Wrestling Hits a New 52-week High: What's Driving It?

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World Wrestling Entertainment, Inc. (WWE - Free Report) has hit a 52-week high of $74.75 on Jun 29 after closing the session a bit lower at $74.35. The high came close on the heels of the company’s announcement of multi-year deals with 21st Century Fox-owned Fox Sports and Comcast’s USA Network for its flagship programs.

These five-year deals for the U.S. distribution of WWE programs, Monday Night Raw and SmackDown Live, will be effective from Oct 1, 2019. Per the agreements, USA Network will continue to air Raw, while SmackDown will be broadcasted on Fridays on the Fox broadcast network.

Per management, these agreements will improve the average annual value of WWE’s U.S. distribution to 3.6 times of the contract with Comcast’s NBC Universal. Further, management stated that these agreements will likely bump up revenues from $311 million in 2019 to $462 million in 2021. There are other agreements that are to be negotiated and renewed in the 2019–2021 period which might drive increases further.

 

WWE expects Adjusted OIBDA of minimum $200 million for 2019 assuming substantial revenue growth from the latest U.S. deals. We note that WWE has for long been focusing on Raw and SmackDown. In this regard, in July 2017, the company announced the extension of partnership with Groupe AB for airing WWE’s Raw and SmackDown.

This Zacks Rank #3 (Hold) company is leaving no stone unturned to boost revenues. The company has been adopting strategies like the development of fresh content, execution of customer acquisition and retention programs, expansion of distribution platform, introduction of features and foray into locations. Further, WWE Network is available in the Indian Subcontinent, Germany, Austria, Malaysia, Switzerland and Japan.

Apart from these, the company had earlier stated that the distribution agreement, which generated a large chunk of television rights revenues, will expire in 2019 in some regions. Licensing of Raw and SmackDown in the United States will terminate in Sep 30, 2019, while in the U.K. and India it is slated for expiry on Dec 31, 2019. The company is looking to renew the distribution agreement in the U.K. by end of 2018 and in India by the first half of 2019.

Shares of the company have rallied more than 106% in the past three months compared with the industry’s growth of 24.4%.

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