If you’re considering investing in WWE stock, you may be wondering whether it’s a good idea. Here’s a look at some pros and cons to help you make a decision.
WWE, Inc. (NYSE: WWE) is an American publicly traded, privately controlled entertainment company dealing primarily in professional wrestling, with major revenue sources also coming from film, music, product licensing, and direct product sales. WWE also refers to the professional wrestling promotion itself, founded by Jess McMahon and Toots Mondt in 1952 as Capitol Wrestling Corporation Ltd. As of 2020, it is the largest wrestling promotion in the world, holding over 500 events a year (with the roster split up into various globally traveling brands), and broadcasting to about 36 million viewers in more than 180 countries. The company’s global headquarters is located in Stamford, Connecticut, with offices in major cities around the world.
History of WWE
World Wrestling Entertainment, Inc., d/b/a WWE, is an American public company that is known for professional wrestling. It has branched out into other areas of entertainment, such as reality television, music, film production, and direct-to-consumer content. The company consists of a portfolio of businesses that create and deliver entertainment content to a global audience.
Vince McMahon Sr.
Vincent James McMahon Sr. (July 6, 1914 – May 24, 1984), better known as Vince McMahon Sr., was an American professional wrestling promoter. He was the founder of Capital Wrestling Corporation Ltd., which promotes under the brand WWE. Vince Jr.’s controlling stake in WWE today is thanks to his father’s promoting, which included bringing Rocky Marciano to wrestle Waldo Von Erich.
Vince McMahon Jr.
In 1982, Vince McMahon Jr. took over the WWE from his father, Vince McMahon Sr. McMahon Jr. changed the focus of the company from regional to national, and began to expand the product offerings. He introduced new characters and storylines, and WWF programming began to air on cable television. The company grew rapidly during the 1980s and 1990s, becoming one of the largest pay-per-view providers in the world.
In 2001, WWE launched its own cable network, WWE Network. The network offers 24/7 programming featuring live events, original shows, classic matches, and more. WWE Network is available in over 180 countries.
In recent years, WWE has faced difficulties due to declining ratings and live event attendance. In 2016, WWE launched a brand split in an attempt to rejuvenate its product offerings. The brand split has resulted in two separate rosters of wrestlers competing on Monday Night RAW and SmackDown LIVE.
The Attitude Era
The Attitude Era is a period in the World Wrestling Federation’s (WWF, now WWE) history that began in late 1997 and ended in mid-2002. It is considered to be the most successful period in WWE’s history. The era was marked by edgier storylines, Ultimate Warrior as the first WWF Intercontinental Champion, D-Generation X as a professional wrestling stable, Mankind as the first WWF Hardcore Champion, “Stone Cold” Steve Austin as the first six-time WWF World Heavyweight Champion, and The Rock as the first eight-time WWF World Heavyweight Champion.
WWE is a publicly traded company, so their financials are available for anyone to see. According to their most recent 10-K filing, their total revenue for 2018 was $930.2 million. Their operating income was $67.4 million, and their net income was $32.4 million. Their total assets are $1.68 billion and their total liabilities are $538.6 million.
In 2019, WWE’s revenue increased 10% to $930.2 million as compared to $846.8 million in 2018. The company’s favorite source of revenue is still its main one, media rights fees. In 2019, they brought in $458.8 million from media rights fees, an increase from $421 million in 2018. This is the bread and butter of the WWE and will likely continue to grow as the company extends its reach around the world.
WWE is a publicly traded company, with shares traded on the New York Stock Exchange under the ticker symbol WWE. As of June 2019, the McMahon family owns approximately 82% of the company’s Class A common stock and approximately 56% of its voting power.
WWE has consistently been profitable, with reported net income of $33 million in 2016, $52 million in 2017, $82 million in 2018, and $47 million in 2019. However, the company’s operating cash flow has been in decline in recent years, from $93 million in 2016 to $74 million in 2017 to just $31 million in 2018. In 2019, operating cash flow rebounded to $88 million.
Looking at WWE’s earnings reports over the past few years, it’s clear that the company’s profitability is largely driven by its live events business and its media rights deals (including its flagship television programs Raw and SmackDown). Other businesses such as consumer products and network subscriptions contribute relatively little to WWE’s bottom line.
WWE has long been a heavily leveraged company with a debt to equity ratio that fluctuates between 2-3. Currently, WWE’s debt to equity ratio is 2.83. This means that for every dollar of equity, WWE has $2.83 of debt. While this is not an ideal situation, it is not necessarily a cause for alarm as WWE has been able to service its debt obligations without issue in the past.
Future of WWE
WWE has been steadily declining in recent years. The company has failed to bring in new viewers and keep their existing ones. The ratings for Raw and SmackDown have been dropping, and attendance for live events has been declining. WWE stock is currently trading at its lowest point in years. Is now a good time to invest in WWE?
New TV Deals
WWE has signed new television deals with USA Network and FOX that will kick in starting October 2019. The deal with USA Network is worth $265 million per year while the deal with FOX is worth $1 billion over five years. This is a big increase from WWE’s current television deals, which are worth $139 million per year. These new deals will significantly increase WWE’s revenue, and there is a good chance that the company’s stock price will increase as well.
Saudi Arabia Partnership
In 2019, WWE entered into a 10-year strategic partnership with the Saudi General Sports Authority (GSA), worth a reported $450 million. The partnership included hosting multiple WWE events in Saudi Arabia, including WrestleMania 36 in 2020.
The partnership was controversial from the start, due to Saudi Arabia’s human rights record. In 2019, the GSA was implicated in the murder of journalist Jamal Khashoggi. This led to several high-profile WWE superstars, such as John Cena and Daniel Bryan, refusing to participate in WWE events in Saudi Arabia.
Despite the controversy, WWE has continued to move forward with its partnership with Saudi Arabia. In 2020, it was reported that WWE had signed a new five-year contract with the GSA, worth a reported $1 billion.
Looking ahead, it remains to be seen how successful WWE’s partnership with Saudi Arabia will be. Due to the ongoing human rights concerns in Saudi Arabia, there is a possibility that WWE could face further backlash from its superstars and fans. However, as long as WWE continues to generate revenue from its partnership with Saudi Arabia, it is unlikely that the company will make any changes to its current arrangement.
In early 2018, Vince McMahon announced that the WWE would be launching a new professional football league, the XFL. The league is set to debut in 2020 and will feature eight teams from across the United States. The XFL will be a single-entity structure, meaning that Vince McMahon will own all of the teams and players in the league. Unlike other professional sports leagues, the XFL will have no team salary cap and no player draft. Instead, each team will be given a pool of money to sign players as they see fit.
The XFL is not the first attempt at a spring football league; Previous leagues such as the USFL (United States Football League) and the WFL (World Football League) have all failed. However, Vince McMahon is confident that the XFL will be successful because it will offer fans a different product than what is currently offered by the NFL. The XFL plans to focus on shorter games, fewer rules, and more excitement.
Only time will tell if the XFL is successful, but it is certainly an interesting development for the WWE. If the league is successful, it could mean big things for WWE stock.
After careful analysis, we believe that WWE stock is a wise investment. The company has a strong brand, loyal fans, and a proven track record of success. While there is always some risk involved in any investment, we believe that the potential rewards outweigh the risks in this case.