Sports entertainment and media company
World Wrestling Entertainment (NYSE: WWE) stock has been punished from
pandemic triggered live event cancellations and restrictions throughout 2020 into 2021. As the
vaccine rollout continues to accelerate, the resumption of live events should enable the Company to reignite not only a major revenue channel but also bolster synergies with other channels. The Company has scheduled WrestleMania for April 10
ththrough April 11
th, 2021, in Tampa, FL. The Company also completed a deal to license WWE Network content to
NBC’s Peacock (NASDAQ: CMCSA) streaming network starting March 18, 2021. Shares were recently smacked down on its Q4 2020 earnings release. This presents prudent investors seeking exposure with opportunistic pullback levels to consider exposure.
Q4 2020 Earnings Release
On Feb. 4, 2021, WWE released its fiscal fourth-quarter 2020 results for the quarter ending December 2020. The Company reported an adjusted earnings-per-share (EPS) profit of $0.24 excluding non-recurring items versus consensus analyst estimates for a profit of $0.30, missing estimates by (-$0.06). Revenues fell (26.2%) year-over-year (YOY) to $238.2 million, falling short of analyst estimates for $245.04 million. The Company noted 2.2 million total viewers watched content over all tiers, representing a 40% YoY increase. Viewers watch over 35 million hours of content, up 14% YoY. Paid subscriptions grew to 1.5 million, up 6% YoY. The Company generated $292 million in free cash flow for 2020. The Company ended the Q4 and 2020 with $593 million in cash and short-term investments, including the $100 million in credit revolver, which was repaid in January 2021.
Full-Year 2021 Outlook
The Company provided a business outlook for full-year 2021. WWE entered in a multi-year licensing agreement with NBC’s Peacock streaming service for its WWE Network. WrestleMania returns to Tampa Bay, FL at the Raymond James Stadium in April 2021 with ticket availability and safety protocols forthcoming. COVID-related effects including cancellations, postponement, and reduced capacity live events to continue through 1H 2021. The Company expects a “significant increase” in expenses due to the return of furloughed employees and increased production costs for its weekly syndicated television shows Raw and SmackDown as it resumes live audience filming. The Company expected adjusted operating-income-before-depreciation-and-amortization (OIBDA) between $270 million to $305 million 2021, driven by the Peacock deal, live ticketed events, large-scale international events, and escalation of core content rights.
Conference Call Takeaways
WWE CEO, Vince McMahon, set the tone, “We no doubt will expect a gradual return to ticketed audiences… We are the most flexible, adaptable media company in the world. We can turn something around as a live event in six weeks.” WWE President Nick Khan detailed the Peacock deal, “Starting March 18, 2021, the entire WWE Network and its content will shift to Peacock in the United States. This includes WrestleMania, our vast library of all of our pay-per-view events, starting with Fastlane on March 2021. As part of this partnership, WWE will maintain access to valuable audience data. As we all know, Peacock is free to Comcast, Xfinity and Cox Cable customers. So, watching Fastlane and subsequently WrestleMania on April 10 and 11th will be free to all those consumers.” This gives access to over 33 million customers. The Company is working on international content licensing deals in India. WWE Studios continues to produce and license both scripted and unscripted content, including the show Young Rock airing Feb. 16, 2021.
Return to Normal
WWE made record profits in 2020 netting nearly $127 million, despite revenues falling. However, this came more from cost cutting including furloughs and most importantly travel expenses. The downtime enabled WWE to bolster its subscription service revenues and close major media deals like with Peacock, which commences in March 18, 2021. To its credit, the Company was able to continue producing it’s Raw and SmackDown weekly broadcasts in a single location. The virtual live audience was projected on screens in the audience section representing real viewers and fans throughout the program. The question is whether the return to normal live events and the expenses associated with it can be offset by revenue growth. In 2020, the Company saw a (-$26.7 million) decline in Live Events revenue. The recent sell-off from Q4 earnings set the bar low providing prudent investors opportunistic pullback levels if looking for exposure.
WWE Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for WWE stock. The monthly rifle chart is attempting to breakout and reverse the multi-year downtrend. The monthly 5-period moving average (MA) and 15-period MA are “kissing” around the $45.82 Fibonacci (fib) level. A breakout forms when the monthly 5-period MA crosses up through the 15-period MA. The monthly rifle chart also formed a market structure low (MSL) buy trigger above $46.98. However, the weekly rifle chart also formed a market structure high (MSH) sell trigger under $48.87. This sets up a two-point channel that needs to resolve to determine the direction of the longer-term trend. In the near-term, the weekly rifle chart lost momentum as peaking out near $60 as the weekly stochastic fell under the 80-band. The weekly 5-period MA is sloping down at $50.86 while the weekly 15-period MA stalls at $47.20. The initial channel tightening has completed, as shares attempt to coil back up through the 15-period MA to retest the weekly 5-period MA. However, shares could continue to fall towards the monthly breakout level. Prudent investors can watch for opportunistic pullback levels at the $45.82 monthly 5/15-period MA/fib, $44.48 fib, $41.87 overlapping fib, $39.91 monthly MSL trigger and $37.86 fib. The upside trajectories range from the $65.90 fib up to the $83.19 monthly upper BBs/fib.
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