Right here’s Why WWE Inventory Is A Good Wager

World Wrestling Leisure inventory (NYSE: WWE) presently trades at $44 and remains to be down 32% thus far this yr. It traded round $47 in February 2020 simply earlier than the outbreak of pandemic and remains to be virtually 5% under that stage as properly. Nonetheless, the inventory has gained 18% since its March lows of $38 in comparison with the S&P 500 which noticed 64% rise throughout this era. The inventory has underperformed the broader market over latest months as a result of the market went up following stimulus measures by the Fed, whereas the identical enthusiasm was not seen in WWE inventory resulting from uncertainty concerning the timing of WWE holding occasions for stay audiences, which is vital to its income progress. As lockdowns are step by step lifted, WWE’s stay occasions are more likely to resume within the coming months and, in flip, merchandise gross sales are additionally anticipated to select up. With elevated digitization of content material, the inventory is more likely to surpass its February 2020 stage and rise to virtually $50 because the disaster abates. Our conclusion relies on our detailed comparability of WWE inventory efficiency through the present disaster with that through the 2008 recession in our dashboard evaluation.

2020 Coronavirus Disaster

Timeline of 2020 Disaster So Far:

• 12/12/2019: Coronavirus circumstances first reported in China
• 1/31/2020: WHO declares a worldwide well being emergency.
• 2/19/2020: Indicators of efficient containment in China and hopes of financial easing by main central banks helps S&P 500 attain a file excessive
• 3/23/2020: S&P 500 drops 34% from the height stage seen on Feb 19, as COVID-19 circumstances speed up outdoors China. Doesn’t assist that oil costs crash in mid-March amid Saudi-led worth battle
• Since 3/24/2020: S&P 500 recovers 64% from the lows seen on Mar 23, because the Fed’s multi-billion greenback stimulus package deal suppresses near-term survival anxiousness and infuses liquidity into the system.

In distinction, right here’s how WWE and the broader market carried out through the 2007/2008 disaster.

Timeline of 2007-08 Disaster

• 10/1/2007: Approximate pre-crisis peak in S&P 500 index
• 9/1/2008 – 10/1/2008: Accelerated market decline comparable to Lehman chapter submitting (9/15/08)
• 3/1/2009: Approximate bottoming out of S&P 500 index
• 12/31/2009: Preliminary restoration to ranges earlier than accelerated decline (round 9/1/2008)

WWE and S&P 500 Efficiency Throughout 2007-08 Disaster

We see WWE inventory declined from ranges of round $16 in September 2007 (pre-crisis peak) to ranges of round $10 in March 2009 (because the markets bottomed out), implying WWE inventory misplaced 38% from its approximate pre-crisis peak. It recovered publish the 2008 disaster, to ranges of about $15 in early 2010, rising by 58% between March 2009 and January 2010. The S&P 500 Index noticed a decline of 51%, falling from ranges of 1,540 in September 2007 to 757 in March 2009. It then rallied to ranges of 1,124, rising by about 48% between March 2009 and January 2010.

WWE Fundamentals Over Current Years

WWE revenues elevated from $659 million in 2015 to $960 million in 2019, primarily resulting from increased stay occasions and merchandise gross sales. Together with increased income, earnings additionally elevated from $0.32 to $0.99 throughout this era. Nonetheless, after the Q2 2020 revenues declined by 17% y-o-y because of the affect of the pandemic, revenues noticed a 37.5% y-o-y rise in Q3 2020 resulting from renewal of its key home distribution agreements of their flagship packages, RAW and SmackDown.

Does WWE Have Adequate Money Cushion To Meet Its Obligations Via The Coronavirus Disaster?

WWE’s complete debt elevated from $35.6 million in 2016 to $222 million in Q3 2020, whereas its complete money elevated from round $267 million to $520 million over the identical interval. The corporate generated virtually $260 million in money from its operations within the first 9 months of 2020, which places it in a fairly snug place to cope with the present disaster.

Conclusion

Phases of Covid-19 Disaster:

• Early- to mid-March 2020: Concern of the coronavirus outbreak spreading quickly interprets into actuality, with the variety of circumstances accelerating globally
• Late-March 2020 onward: Social distancing measures + lockdowns
• April 2020: Fed stimulus suppresses near-term survival anxiousness
• Could-June 2020: Restoration of demand, with gradual lifting of lockdowns – no panic anymore regardless of a gradual enhance within the variety of circumstances
• July-November 2020: Weak Q2 outcomes and modest restoration in Q3, however continued enchancment in demand and progress with vaccine improvement buoy market sentiment

Regardless of the latest surge in the variety of new Covid-19 circumstances within the U.S., we count on continued enchancment in demand to buoy market expectations. As buyers focus their consideration on anticipated 2021 outcomes, we imagine World Wrestling Leisure inventory has the potential for some positive factors as soon as fears surrounding the Covid outbreak are put to relaxation. With the expectations of robust income and earnings progress in 2021 and with buyers’ focus shifting to 2021 numbers, WWE’s inventory is more likely to go near $50 publish the present disaster.

What should you’re searching for a extra balanced portfolio as an alternative? Right here’s a prime quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of corporations with robust income progress, wholesome income, masses of cash, and low threat, it has outperformed the broader market yr after yr, constantly.

See all Trefis Worth Estimates and Obtain Trefis Information right here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Groups | Product, R&D, and Advertising and marketing Groups

The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.