Guggenheim remains bullish on WWE’s renewal cycle

By Michael Elkins

Guggenheim reiterated a Buy rating on World Wrestling Entertainment , Inc. (NYSE:WWE), and raised the price target on the stock to $105.00 (from $94.00) as the sports entertainment company enters the early stages of a strategic review. Guggenheim remains bullish on the company’s U.S. renewal cycle as business trends remain strong.

WWE reported 2022 OIBDA of $385mm at the high end of guidance ($370-385mm) and slightly below Guggenheim’s $390mm outlook. Management issued 2023 OIBDA guidance of $395-410mm, driven by record revenue and relative flat operating expenses.

Analysts wrote in a note, “We have growing confidence that WWE is poised for a material step-up in the U.S. rights next year. Our confidence is underpinned by a robust data set that on every level points to an up renewal: 1) WWE remains relatively cheap compared to other sports on a rights fee paid per viewer hour delivered basis, 2) recent sports rights renewals in the U.S. have shown pricing strength, 3) newer entrants such as Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) are increasingly bidding for sports rights, and 4) WWE's ratings have been decent this year.”

They continue to see a tight window in 1H23 where the industrial logic of a sale would make sense to certain suitors ahead of the RAW and SmackDown rights renewals. On a fundamental basis, they remain positive on the U.S. rights renewal.

They believe the current India deal has ~2 years left, although due to changes in control at Sony Pictures Networks India (NYSE:SONY), there may be some flexibility sooner. India is WWE’s number-one market in terms of content consumption and audience size, with sports viewership trailing only cricket. Looking ahead, Guggenheim believes WWE is well-positioned to benefit from a competitive process during its next India renewal.

The company continues to look at options for its international network subscriber base. Management has recently said they should have more announcements in the near future. They expect several additional large regions/countries to be done this year including most of Western Europe.

WWE had $479mm of cash at the end of 4Q with total debt of ~$235mm (including the convert). The company did not purchase stock during the quarter due to the investigation.

Shares of WWE are up 4.32% in mid-day trading on Friday.

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