“What became clear from WWE’s reported earnings and comments was that WWE is COVID-19 resistant” cheered five-star Needham analyst Laura Martin following the earnings report.
She gave four key reasons why WWE is poised to excel even in the current global economic crisis:
1) WWE is one of the only companies in the US still producing new content today;
2) moving new production to its performance center in Florida positively impacts its free cash flow because WWE loses money from its live events;
3) over 50% of WWE’s revenue comes from 5-year media deals with large companies such as FOXA, USA Network, etc and these payments continue since WWE is delivering new episodes each week; and
4) Florida has declared WWE content creation an “essential service,” which lowers WWE’s new customer acquisition costs as there is less competition from new sports, film or TV content as lockdowns continue.
Specifically, WWE reported 1Q20 revenue of $291 million (up 60% year-over-year), and Adjusted EPS of $0.41 (up vs its 1Q19 loss of $0.11). Operating income was $53.3 million, compared to a loss of $6.8 million in the prior year quarter. Meanwhile free cash flow totaled $57.6 million, compared to a $10.1 million use of cash in the first quarter 2019.
At the same time, WWE Network average paid subscribers were 1.46 million, consistent with guidance, while digital video views increased 25% to 9.6 billion.
“Our first quarter financial performance was strong and largely unimpacted by the COVID-19 outbreak,” said Vince McMahon, WWE Chairman & CEO.
Frank Riddick, interim CFO, added, “Given the current uncertainties of the potential impacts of COVID-19 on our business, we have reduced employee, talent and other costs and delayed approximately $140 million in capital spending related to our new headquarters to strengthen our financial performance going forward.”
With these figures in mind, Martin reiterated her WWE buy rating with a $45 price target.
Overall the stock shows a slightly more cautious Moderate Buy analyst consensus, with an average analyst price target of $51 (14% upside potential). (See WWE stock analysis on TipRanks).
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