While I might not find its content as compelling as its die-hard fans do, from an investor’s perspective, World Wrestling Entertainment (NYSE:WWE) is a compelling investment.
Even accounting for the horrific start to the new year, WWE stock is a long-term winner.
Since first trading in late 1999, shares have almost doubled in value. And in 2018 and 2019, the equity briefly flirted with triple digits before succumbing to bearish pressure.
For me, it was a lesson to put my high-brow hubris aside and recognize that there are different strokes for different folks.
However, my personal distaste for World Wrestling Entertainment’s product is aligning with current market sentiment. Recently, JPMorgan analyst David Karnovsky downgraded WWE stock to “neutral” from “overweight.” Karnovsky also cut his price target to $47. Previously, he forecasted $80.
And the downgrade isn’t unjustified.
In the company’s most recent fourth-quarter earnings report, management disclosed revenue of $322.8 million. However, analysts anticipated a sales haul of $333.28 million. Adding to the woes, paid subscribers for the WWE Network plummeted 10%. As such, Karnovsky warned that too many variables exist for WWE stock.
Finally, uncertainty plagues the future direction of the organization. In late January of this year, WWE announced the immediate exit of co-presidents George Barrios and Michelle Wilson. After enjoying resounding gains over the years, the smart money dumped out of WWE stock.
But with shares more attractively priced, should you wager a bet?
Promising Synergies in Play for WWE Stock
One promising synergy for WWE stock is the wrestling league’s tremendous crossover success. You may not like WWE but you probably like the charismatic Dwayne “The Rock” Johnson. His mass appeal is undeniable. For example, he made Comcast’s (NASDAQ:CMCSA) Universal Pictures’ Fast and Furious franchise somewhat watchable.
Plus, Universal took a shot and featured Johnson in a Fast and Furious spinoff called Hobbs & Shaw. Despite the ridiculous title and even more ridiculous plot, the film did not disappoint at the box office. Thus, you can expect this series to have more lives than Michael Myers.
This crossover success ultimately paints a great spotlight onto the WWE. And with recent news that Johnson’s daughter Simone is signing with the league, the enthusiasm will only increase.
Diversity Is a Huge Engine for Wrestling
Another thing I have to give credit to the organization is its commitment to diversity. Granted, the organization has historically marginalized wrestlers of color. But in my opinion, they’ve made substantial progress.
Honestly, it’s a lesson that Hollywood should learn. In recent years, their award shows resemble an America of the 1950s despite their politically pandering rhetoric. You won’t find that with World Wrestling Entertainment: I’ve seen multiple ethnic groups represented in its product.
I’m not making my own political statement here. Rather, diversity is good for business. The otherwise ridiculous Hobbs & Shaw performed well because of its appeal to broad demographics. Therefore, I don’t think it’s any coincidence that the wrestling league has seen its international revenue pick up.
Ultimately, I begrudgingly view WWE stock as a buy on this sharp discount. You may not like it but so many do. Learn from my prior mistakes: this is not a train you want to stand in front of.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
