Shares of WWE (WWE - Free Report) stock continued its historic run on Friday, trading as much as 6% higher after Morgan Stanley (MS - Free Report) raised its price target for the firm to $100 from $58. The company is up nearly 271% in the last twelve months and 150% on a year-to-date basis.
Slamming the Competition
WWE signed two major TV deals for its flagship weekly shows in late June that are set to begin in October of 2019. Based on the agreement, Comcast’s (CMCSA - Free Report) USA Network will televise the company’s program, Raw, on Monday nights, while Fox (FOXA - Free Report) will air its Smackdown program on Friday nights.
The deals are huge, boosting the annual value of WWE’s US distribution 3.6 times higher than its previous deal with NBCUniversal. WWE revised its OIBDA projections up to at least $200 million for 2019, which is great news to investors considering the year only covers three months of the lucrative new deal.
As MS analyst Benjamin Swinburne noted to clients on Friday, “To some extent the match is over as WWE is likely the fastest growing earnings story.”
The analyst projects adjusted OIBDA to hit $500 million by 2021. When compared to the $130 million the firm earned last year, it’s clear why the stock has performed so strongly.
Estimates for this quarter’s EPS and revenue are nearly 129% and 13% higher than their year-ago figures, a testament to the company’s recent growth. Since the deal’s announcement, 3 analysts have revised earnings estimates upward. This revision activity has brought WWE to a Zacks Rank #2 (Buy).
Is the Ride Over?
Investors should note that WWE’s valuation appears stretched compared to its industry and the S&P 500. However, the company is aggressively pursuing revenue streams outside of its TV deal as well. The company saw a surge in advertising revenue in 2017 thanks to the addition of partners such as Yum Brand’s (YUM - Free Report) KFC, AT&T (T - Free Report) , and Nestle (NSRGY - Free Report) .
WWE is also leveraging its new partnership with sports marketing agency Lagardère Sports to build an international sponsorship portfolio in all countries, excluding China. This looks quite promising, especially considering the company saw its advertising and sponsorship sales rise nearly 30% in its most recent earnings report.
While competition is fierce, and costs are rising, the WWE rocket ship has not necessarily fizzled out just yet. Its new initiatives will be crucial in determining if investor optimism has already been fully baked into the stock, but there very well still could be plenty of money still to make.
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