World Wrestling Entertainment, Inc. (NYSE:WWE) is the largest professional wrestling brand in the world. Chairman and CEO Vince K. McMahon has earned a reputation as a ruthless businessman and athlete who ushered in a new era of sports entertainment.
The company recently signed an exclusive streaming deal with Comcast Corporation (NASDAQ:CMCSA) to migrate its WWE Network content to NBCU’s Peacock.
The WWE brand is well known but what about the investment; is WWE stock a Buy?
McMahon destroyed the old-school regional territory system established by the National Wrestling Alliance (NWA) when he syndicated wrestling matches on TV. In fact, NBC and USA Network were the places to catch all the biggest stars of wrestling at the end of the 20th century.
In 2000, USA Network filed a breach of contract lawsuit against the company, which migrated to Viacom. By 2014, the company successfully launched its own WWE Network and became the first professional sports league to shake up the legacy cable provider system.
Can WWE bulk up investors’ portfolios or will it leave them counted out of the ring?
The Fascinating History Of Vince McMahon’s WWE
WWE is a sports entertainment brand that started with professional wrestling and expanded into football, movies, and more. Its origins date back to the 1930s and Vincent J. McMahon, whose Capitol Wrestling Corporation (CWC) joined the NWA for decades.
McMahon Sr. and partner Toots Mondt didn’t like the idea of a wrestler they managed losing the World Heavyweight Championship. So, they created a new wrestling league that McMahon Sr. would eventually take over.
He then hired Hulk Hogan, Roddy Piper, Randy Savage, and other soon-to-be legends, while broadcasting the league (then called World Wrestling Federation, before a trademark lawsuit over WWF from the World Wildlife Fund) on network television.
While its normal television broadcasting introduced the world to larger-than-life Superstars with soap opera drama, the company’s WrestleMania pay-per-view was the game changer. Soon it was drawing massive crowds, selling merchandise by the truckload, and charging $50 to see major events.
Not only did WWE crush the regional wrestling federations, but it destroyed well-funded efforts like World Championship Wrestling (WCW) and Extreme Championship Wrestling (ECW). It monopolizes the industry and has a rocky relationship with its employees.
Professional wrestlers are independent contractors, for example. This means they fought for employee rights as recently as 2019. And its staff performed a WrestleMania 2020 without an audience long before the NBA bubble season. It’s one of the only major production studios that continued cranking out content during the pandemic.
That’s great for fans, but the performers didn’t get hazard pay. Concerns about costs and revenues have some investors wondering if WWE stock is worth buying.
Is WWE Stock A Buy?
Recently, WWE had a market capitalization over $4 billion and an earnings multiple of around 25x.
The stock pays an annual dividend of $0.48 paid in quarterly cash installments. That equates to a dividend yield of 0.89 percent.
When it rebounded, WWE share price traded over $50 per share. It still hasn’t reached its previous ceiling $60.00, but revenues are increasing year over year.
Third quarter 2020 revenue was $221.6 million, which increased 19 percent from the same quarter of 2019. It’s powered by 1.6 million paid subscribers who paid $10 per month and licensing fees from its content.
WWE’s ecommerce revenue was $9.1 million for the quarter, which is a 50 percent increase from the prior year’s quarter. Its digital content received about 9.2 billion video views, and that’s ultimately what Peacock is paying to show off on its streaming service.
The official details of the deal haven’t been released, but it’s estimated at around $1 billion for five years. It’s an interesting play, but it has risks.
WWE Has Faced Scandals & Revenue Hits
Even if the outcomes are preplanned and moves are choreographed, professional wrestling is dangerous. These independent contractors are regularly thrown through tables, onto concrete, hit with chairs, and worse in front of giant crowds like gladiators.
The company was the center of a lot of controversies over the years, from alleged steroid usage to implications in the deaths (Owen Hart) and serious injuries (Steve Austin) of some performers. Shockingly, you can learn about much of the behind-the-scenes shenanigans through documentaries on the WWE Network itself.
Not every move McMahon makes is gold, either. Remember the World Bodybuilding Federation? What’s your favorite XFL incarnation?
The company hasn’t had a show with a live audience in over a year. There’s a good chance it could suffer without its avid live fan base. This is a big hit to revenue, and there are other leagues working to steal its shine.
Is WWE A Monopoly?
WWE is a dominant force in professional wrestling, and it has few competitors in that arena. Impact Wrestling, Ring of Honor, and All Elite Wrestling are all taking a swing. The competition is good, because many will tell you it’s not easy to stay independent and make a real impact on the sport.
Mick Foley and AJ Styles are great examples of professional wrestlers who did well on indie circuits but were inevitably swallowed by the company.
Perhaps the only real competitor to WWE is the Ultimate Fighting Championship. Fans of both sports have seen athletes move between both real and fake fighting, and it could bleed views to an MMA promotion.
Just nobody tell Vince I said that, or he’ll start another Brawl for All and get somebody hurt.
Is WWE Stock A Buy? The Bottom Line
WWE is a giant brand in sports entertainment. Its wrestling matches may be “fake,” but the profits it generates from its shows are very real. Of course, lockdowns shut down its live events, and that put the company in a losing position it hasn’t been in for a long time.
But McMahon went back to the old playbook and made a deal with an old partner making Peacock its exclusive streaming service.
The WWE Network was a great moment in sports, but this move shows how hot the streaming wars will get in the 2020s. Netflix poached creative staff from Hollywood studios. Disney and Warner bypassed theaters to release new movies on their streaming services.
WWE Network migrating to Peacock signals the start of what’s sure to be an aggressive (and expensive) race to bring exclusive sports content to streaming services.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.