The controversial retirement of Vince McMahon
Shares of sports media and entertainment company World Wrestling Entertainment (NYSE: WWE) hit two-year highs in August and are up 35% on the year. The company was mired in a controversy over payments to women with whom its chairman and chief executive, Vince McMahon, had sex. The misconduct allegations led to Mr. McMahon’s resignation despite posting record numbers in his second quarter 2022 earnings release. By all accounts, the Company is firing on all cylinders. Its licensing deal with Peacock led to the highest viewership for its last four premium live events in its history with viewership increases ranging from 17% to 49% year-on-year increase (YoY). The return of the live event trend has seen business surge across the board for event companies. Live Nation (NYSE: LYV) reported a 20% spike over 2019 attendance in its most recent quarter. Madison Square Garden Sports (NYSE: MSGS) reported 19.3% year-over-year revenue growth along with a surprise earnings per share of $1.54 versus loss (-0.43 $) expected by analysts. WWE is no exception, its WrestleMania 39 event scheduled for April 2023 sold its 90,000 tickets in one day. It was the best-selling ticket event in WWE history and up 42% from the first day sales of WrestleMania 38.The controversial retirement of Vince McMahon
On July 22, 2022, WWE Chairman and CEO Vince McMahon announced his retirement from an active role with the company amid controversy and an internal investigation. News sources have reported allegations that McMahon paid more than $12 million in “silent money” to former WWE employees with whom he had relationships. The board is investigating allegations of sexual misconduct by three former employees and a contractor. They also said McMahon used company funds to make certain payments, leading to a possible restatement of the financial statements. While this may be a PR nightmare for shareholders, fans have taken it seriously as they are used to telling arcs of this nature. The assumption is that the hush money came from McMahon’s personal checkbook and not WWE’s corporate checkbook. Co-CEO Stephanie McMahon and co-CEO Nick Khan take the reins of the company with Paul “Triple H” Levesque leading talent and creative.
Earnings kicked ass
On August 16, 2022, WWE released its fiscal second quarter 2022 results for the quarter ending June 2022. The company reported adjusted earnings per share (EPS) of $0.59 excluding one-time items versus estimates. consensus for a profit of $0.55, beating estimates of $0.04. Revenue rose 23.6% year-on-year to $328.2 million, beating analyst estimates of $322.38 million. The most successful second quarter in its history. Adjusted operating income before depreciation and amortization (OIBDA) increased 34% to $91.5 million. The Company repurchased nearly 170,000 shares during the quarter at approximately $58.70 per share. WWE Chief Financial Officer Frank Riddick commented: “During the quarter, we exceeded the top of our guidance. Adjusted OIBDA increased 34%, reflecting revenue growth of 24%. Our strong financial performance is primarily due to our return to a full live events calendar and our consumer products business. These items more than offset an increase in production, content-related and other expenses. For 2022, we are raising our full-year adjusted OIBDA guidance to a range of $370-385 million.
Here’s what the charts say
Using the Rifle Charts on the weekly and daily time frames provides an accurate view of the landscape for WWE stock. The weekly Rifles chart formed a puppy breakout as it lifted off at $63.71 Fibonacci level (fib) and peaked at two-year highs at $75.23. The Rifles chart’s weekly uptrend stagnates below the $71.04 fib as the 5-period moving average (MA) slides to $70.55. The weekly 15-period MA support rises to $66.03. The weekly 200-period MA overlaps the weekly 50-period MA support at $58.88. The weekly lower Bollinger Bands (BB) lie at $52.82. The weekly Stochastic peaked just above the 80 band ahead of a potential cross down or mini up. The weekly weak market structure (MSL) buy triggered above $60.97. The daily breakdown of the Rifles chart is trending lower with a 5 period MA down at $69.25 and a 15 period MA resistance at the fib of $71.04. The daily BB lower sits at $67.78 and the daily 50-period MA at $66.87. The Stochastic peaked near the 90 band only to reverse into a mini reverse pup falling all the way down towards the oversold 10 band. Attractive pullback levels to consider for exposure are at the level of $67.59, $65.75, $63.71, $62.02, $59.83, $57.54, and $55.02.
Attractive acquisition target?
When Vince McMahon stepped down as CEO, the assumption was that it would open the company up for potential sale. Vince McMahon still owns nearly 80% of WWE stock and voting control of the company. Any sale of the Company would still require its approval. He’s been hesitant to consider selling his idea in the past, but times can change. The brand is arguably more popular and profitable than ever thanks to its close relationship with Comcast (NASDAQ: CMCSA). They have already reached an agreement with WWE to buy their library of WWE Network content in addition to already owning the rights to broadcast Monday Night Raw and its minor league equivalent NXT. WWE creates a network effect between talent, brands, licensing, merchandising, content, events and films. When these parts are sliced and sold as parts, the machine may lose its cumulative effect. There has been speculation about other content-hungry media giants that could benefit from the acquisition like Disney (NYSE: DIS), Apple (NASDAQ: AAPL) and Netflix (NASDAQ: NFLX). However, with Comcast already in a deep relationship with WWE, they would be the most logical suitor.
