Sports entertainment and media company World Wrestling Entertainment (NYSE: WWE)
stock hit two-year highs in August and is up 35% on the year. The Company was mired in controversy over payouts to women that by its chairman and CEO Vince McMahon had sexual relations with. The misconduct allegations led to the resignation of Mr. McMahon despite reporting record numbers in its Q2 2022 earnings release. By all accounts, the Company is firing on all cylinders
. It’s licensing deal with Peacock has led to highest viewership for its last four premium live events
in its history with viewership
increases ranging from 17% to 49% year-over-year (YoY) increases. The return of live events trend has seen business jump across the board for events companies. Live Nation (NYSE: LYV)
reported a spike 20% over 2019 attendance in its latest quarter. Madison Square Garden Sports (NYSE: MSGS)
saw 19.3% YoY top line growth along with a surprise $1.54 profit per share compared to the (-$0.43) loss expected by analysts. WWE is no exception, its WrestleMania 39 event scheduled for April 2023 sold out its 90,000 tickets in one day. This was the highest sold ticket event in WWE history and up 42% over first-day sales of WrestleMania 38.
Vince McMahon’s Controversial Retirement
On July 22, 2022, WWE Chairman and CEO Vince McMahon announced his retirement from an active role in the company amid controversy and an internal investigation. News sources reported allegations that McMahon paid over $12 million in “hush money” to former employees of WWE that he had affairs with. The Board of Directors is investigating allegations of sexual misconduct from three former female employees and one contractor. They also stated that McMahon did use company funds to make certain payments resulting in possible restating of financials. While it may be a P.R. nightmare for shareholders, the fans took it in stride as they are used to story arcs of this nature. The assumption is that the hush money came from McMahon’s personal checkbook and not the WWE’s corporate checkbook. Co-CEO Stephanie McMahon and Co-CEO Nick Khan are taking the reigns leading the Company forward with Paul “Triple H” Levesque heading talent and creative.
Earnings Kicked Butt
On Aug. 16, 2022, WWE released its fiscal second-quarter 2022 results for the quarter ending June 2022. The Company reported an adjusted earnings-per-share (EPS) profit of $0.59 excluding non-recurring items versus consensus analyst estimates for a profit of $0.55, beating estimates by $0.04. Revenues rose 23.6% YOY to $328.2 million, beating analyst estimates for $322.38 million. The most successful second quarter in its history. Adjusted operating income before depreciation and amortization (OIBDA) rose 34% to $91.5 million. The Company bought back nearly 170,000 shares in quarter around $58.70 per share. WWE CFO Frank Riddick commented, “In the quarter, we exceeded the high end of our guidance. Adjusted OIBDA increased 34% reflecting 24% revenue growth. Our strong financial performance was primarily driven by our return to a full live event schedule and our consumer products business. These items more than offset an increase in production, content-related, and other expenses. For 2022, we are raising our full year Adjusted OIBDA guidance to a range of $370 to $385 million.”
Here’s What the Charts Say
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for WWE stock. The weekly rifle chart formed a pup breakout on the blast off through the $63.71 Fibonacci (fib) level and peaked at two-year highs at $75.23. The weekly rifle chart uptrend is stalling below the $71.04 fib as the 5-period moving average (MA) slips at $70.55. The weekly 15-period MA support is rising at $66.03. The weekly 200-period MA overlaps with the weekly 50-period MA support at $58.88. The weekly lower Bollinger Bands (BBs) sit at $52.82. The weekly stochastic peaked just above the 80-band ahead of a potential cross down or mini pup up. The weekly market structure low (MSL) buy triggered above $60.97. The daily rifle chart rifle chart breakdown has a downtrend with a falling 5-period MA at $69.25 and 15-period MA resistance at the $71.04 fib. The daily lower BBs sit at $67.78 and daily 50-period MA at $66.87. The stochastic peaked near the 90-band to reverse into a mini inverse pup falling all the way down towards the oversold 10-band. Attractive pullback levels to consider for exposure are at the $67.59 fib, $65.75 fib, $63.71 fib, $62.02 fib, $59.83 fib, $57.54, and the $55.02 fib level.
Attractive Acquisition Target?
When Vince McMahon stepped down as CEO, the assumption was that it would open the Company up for a potential sale. Vince McMahon still owns nearly 80% of WWE stock and voting control of the Company. Any sale of the Company would still need his approval. He has been reluctant to consider selling his brainchild in the past, but times may be changing. The brand is arguably more popular and profitable than ever thanks to its tight relationship with Comcast (NASDAQ: CMCSA). They already made a deal with WWE to purchase their WWE Network library of content in addition to already owning the broadcast rights to Monday Nigh Raw and its minor league equivalent NXT. The WWE creates a networking effect between the talent, brands, licensing, merchandizing, content, events, and movies. When those pieces are sliced up and sold in parts, the machine can lose its cumulative effect. There’s been speculation of other content hungry media giants that could benefit from the acquisition like Disney (NYSE: DIS), Apple (NASDAQ: AAPL), and Netflix (NASDAQ: NFLX). However, with Comcast already in an entrenched relationship with WWE, they would be the most logical suitor.
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