WWE Wobbly After Double-Jab Downgrade From Wells Fargo

Shares of World Wrestling Entertainment wobble after receiving a double-punch downgrade and price-target cut from Wells Fargo.
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Shares of World Wrestling Entertainment  (WWE) - Get Report were wobbly on Monday following a double-jab downgrade from analysts at Wells Fargo, who delivered the one-two punch amid what they see as “too many misfires” in terms of the entertainment company’s revenue-boosting efforts.

WWE stock was up 0.21% at $42.62 on Monday following a drop of nearly 4% premarket after Wells Fargo analyst Steven Cahall downgraded the stock to underweight from overweight and cut his one-year price target to $36 from $80 amid various programming initiatives that he said aren’t delivering profits.

In a note to clients, Cahall said there have been “… too many misfires at WWE for investors to take interest in the near future,” and that there “… are still downside risks.” Specifically, Cahall pointed to potential deals in India and Middle East coming in below expectations. He also noted that projected operational expenses remain “elevated after 2020.”

While ratings improvements driven by the move by "Smackdown" to Fox are starting to show some positive momentum, there are still longer-term concerns about TV distribution right values.

On the broadcast distribution front, monetizing WWE Network content “could be incremental, but we’re not convinced this will be an earnings game-changer,” Cahall said, noting that his team currently values WWE Network at $400 million.

At issue for WWE is a general decline in both attendance and viewership of wrestling and other "sports" and entertainment efforts that the company focuses on. At the same time, other forms of "alternative" sports including the newly launched XFL are also seen as more competition for WWE - both on the physical attendance side and on the viewership side.

Demand for tickets to XFL games on the league’s opening weekend surpassed expectations, with the "get-in" price to attend the D.C. Defenders inaugural contest reaching $130 on the secondary market, according to John Wall Street of Sports Illustrated.

Sales of Houston Roughnecks tickets were so strong that the club decided to open up two additional sections in the second deck of TDECU Stadium (six in total) to accommodate walk-ups, and both New York and Dallas posted official attendance figures north of 17,000.