World Wrestling Entertainment (WWE) Still Likely to Have 'Transformative Transaction' - FBN

FBN Securities analyst Robert Routh reiterated an Outperform rating and VPS of $56 on World Wrestling Entertainment (NYSE: WWE), saying they still expect a "transformative transaction."

Routh sees the following option for the company, which he said would be "game-changing":

• The WWE Network could simply be "dropped" into a larger OTT platform and the licensing fees and other revenue to WWE moving forward from doing this would likely be much larger and more visible than they are now stemming from the WWE Network due to churn issues.
• WWE could opt to sell the WWE Network and the monetization of its digital initiatives to a larger player for equity in said player
  • 1. This would provide the company with a huge upfront payment in the form of stock in the acquiring entity (we estimate as much as WWE's current equity value) while leaving the core business in the hands of the McMahons.
  • 2. In addition to the large upfront payment, in any such deal WWE would also get annual payments for the digital rights to all new content produced by the company indefinitely.

He imagines a deal looking something like this:

• WWE would sell the WWE Network and the digital initiatives to Alphabet for $4 billion in GOOG equity.
• This is more than the company's current equity value.
• Then, Alphabet would agree to pay WWE $200-$300 million per year for the digital rights to new content.
• This would be at 100% margin, and thus would be capitalized at 10x, or $2-$3 billion.
• The McMahons would continue to run the company’s live action, merchandising, and Studio and TV businesses.
• This portion of the company would likely be valued at $2-$3 billion.
• This would net value WWE equity at $8-$9 billion, or well over $100 per share

For an analyst ratings summary and ratings history on World Wrestling Entertainment click here. For more ratings news on World Wrestling Entertainment click here.

Shares of World Wrestling Entertainment closed at $45.53 yesterday.

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