Shares of World Wrestling Entertainment (NYSE:WWE) closed higher by over 8% following mixed news. First, Loop Capital analyst Alan Gould upgraded WWE stock from “hold” to “buy” and increased its price target from $69 to $90. Second, WWE disclosed that it had incurred $14.6 million in unrecorded expenses that were paid out by former CEO Vince McMahon. The money was paid to several women between 2006 and 2022 to “ensure silence” on matters related to sexual misconduct. As a result, WWE will have to restate its financial results between 2019 and 2021 to reflect the additional expenses.
The wrestling company also hinted that additional entities may be investigating McMahon’s actions. WWE added:
The Company has also received, and may receive in the future, regulatory, investigative and enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters.
In addition, WWE originally scheduled to report earnings on Aug. 9. That date may be postponed as it works to revise its financial results. In the meantime, McMahon’s daughter, Stephanie, will take over as chairwomen and co-CEO, while current President Nick Khan will also step up as co-CEO.
With that in mind, let’s get into the details of the WWE stock upgrade.
Why Is WWE Stock Up Today?
Gould believes that the chances of a WWE buyout are rising now that McMahon has stepped down. The analyst cites several potential buyers, such as Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA) and even Netflix (NASDAQ:NFLX). In addition, WWE already has an outstanding agreement with Comcast for streaming and live media rights. As a result, the potential of a deal “should also help put a floor under WWE’s shares.”
For 2025, Gould’s base case for earnings per share is $5. He adds that EPS of $6 could be attainable based on the “trend of recent sports rights.”
Meanwhile, MKM Partners analyst Eric Handler raised his price target from $70 to $79. He notes that while the departure of McMahon will be a major event in WWE history, it won’t affect the company fundamentally. Like Gould, Handler also believes that the chances of a buyout have elevated. His price target is based on a 15x multiple of expected 2023 adjusted operating income before depreciation and amortization (OIBDA).
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.