World Wrestling Entertainment lost a lot of fans on Wall Street last year when its WWE Network streaming service failed to live up to subscriber expectations. But it’s lifting itself off the mat, and becoming a favorite among analysts who now see its continued growth as evidence that specialized online video services can thrive — and take a bite out of traditional television.
This morning BTIG’s Brandon Ross joined that growing group. He initiated coverage of WWE telling buyers that it’s “time to get back in the ring” with “one of the few forward thinking traditional media companies.” WWE shares are up about 4% — and touched $17.16 — after he gave it a chest thumping price target of $25 price target.
Yesterday Bernstein Research’s Todd Juenger called WWE “the original pioneer” in video streaming with “more experience…than any other company we know of.” Last year CEO Vince McMahon challenged his company’s lucrative cable pay-per-view sales with the launch of its $9.99 a month WWE Network streaming service which is approaching 1.5 million global subscribers.
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Ross acknowledges that WWE was body slammed early last year when the streaming network’s subs and a renewed cable TV deal with NBCUniversal fell short of the Street’s expectations. The stock is down 47% from late March 2014.
But he says that “WWE is now a vertically integrated Media company with content and a distribution system that look well positioned for today’s evolving media ecosystem — an enviable position compared to a number of other media names we cover.” And with an enterprise value of $1 billion, it’s “significantly undervalued.”
The online service gives WWE “real-time feedback on what content is working and what isn’t. No other traditional media company in the video ecosystem has this. …In time, WWE should be able to marry this data with the (limited) data it gets from Ticketmaster on its live events, and retail data from WWEShop. This should create further commerce opportunities.”
Ross also sees growth from the rising number of broadband homes, and connected TVs.
Yet the analyst believes that WWE can continue to do just fine with its conventional TV arrangements. Cable networks didn’t want to bid against NBCU last year because they feared that WWE Network would cannibalize ratings. “This has not materialized,” though, with WWE Raw ratings rising 2% last year while SmackDown was up 3%. Advertisers like the fact that 90% of the audience watches live.
Meanwhile NBCU “has recognized that WWE content is becoming increasingly important.” Later this year SmackDown will move to USA Network from smaller SyFy. The TV company and WWE are reintroducing the brand with an ad campaign built on the tag line: “For The Hero In All of Us.”
Although investors have been warming to WWE, views of the company remain mixed. Early this month Benchmark Company’s Mike Hickey warned that subscriber momentum likely will be “challenged over the next couple of quarters.”
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