World Wrestling Entertainment, Inc. (NYSE: WWE)’s annual average fees for its “Smackdown” and “Raw” programs will increase 3.6-fold to $524 million under new deals struck with Comcast Corporation (NASDAQ: CMCSA)’s USA Network and Twenty-First Century Fox Inc (NASDAQ: FOXA)’s Fox Sports. With successful renewals in the United States under its belt, and likely more to come, we believe WWE is in the process of being re-rated to reflect the dramatic changes of its brand and profitability profile,” KeyBank wrote. “The terminal implications imply that with execution, WWE has the potential to invest and set itself up for even more lucrative TV renewals and accelerate international OTT growth.”
International Upside
The increase in U.S. contract value “implies that with successful renewals in the U.K. and India estimates still have room for meaningful upside,” KeyBank wrote.

If WWE just maintains its U.K. and India contracts without raising the value, the company will still exceed aggregate expectations. But it could do even better.

“Considering WWE saw increases in these countries that were multiples higher back in 2014, we think these additional deals can add a significant amount of revenue on top of tonight's guided figures,” Wells Fargo wrote Tuesday.

Guidance And Forecasts

KeyBank anticipates 2019 operating income before depreciation and amortization of about $232 million against company outlook of at least $200 million. Guggenheim forecasts $230 million and MKM Partners $212 million.

MKM also predicted 2020 OIBDA could exceed $400 million to yield $280 million in free cash flow, and it warned that its price target may rise nearly 50 percent on yet-to-be adjusted calculations.

“With essentially no debt and a modest $40mn annual dividend payment, WWE should be facing the high quality problem of what to do with its excess cash,” MKM analysts wrote. “High business model visibility into 2024 could also make it an attractive buyout candidate, in our view.”