World Wrestling Entertainment (Ticker Symbol: WWE) has a new rival in town, All Elite Wrestling (AEW). The new entertainment company will be competing against WWE for TV spots and fan viewership. WWE has had a firm stronghold on entertainment sports throughout the past three decades after it acquired several rival organizations in the early 2000s. The AEW will have its first pay-per-view event, “Double or Nothing,” this Saturday in Las Vegas.
This comes on the heels of WWE’s disappointing first-quarter earnings report. The top wrestling entertainment brand announced a $5.3 million loss in revenue of $182.4 million compared to the $187.7 million in the first quarter of 2018. WWE also reported an operating loss of $6.8 million for the first quarter of this year, a disappointing turn from the $21.8 million the company earned in the first quarter of 2018. WWE Network’s subscriber base rested at 2 million in April of this year. That number was down 120,00 from this time last year. Vince McMahon, Chairman and Chief Executive Officer of WWE, explained the disappointing report as being due to several superstar absences as a result of illness and personal issues through the first quarter of this year.
WWE’s stock had a wonderful start to 2018, rallying over 200% in the first three quarters of the year. The rally was led by TV renewals with USA network and Fox Sports, along with a newly announced $500 million stock buyback program. WWE’s stock took a bit of a breather from its rally in the fourth quarter of 2018, retracing 25% of the previous move. The stock then put in its first oversold condition in its Relative Strength Index in over a year.
During that time, WWE’s stock put in an Inverse Head and Shoulders formation. Traders and investors sometimes look at Inverse Head and Shoulders patterns for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in WWE’s case. The stock broke out of that formation to the upside and proceeded to rally 30% higher. WWE’s stock traded to an all-time high of $100.45 on April 24th of this year. The stock is currently trading below both its 100 and 200-day Moving Averages. Currently, it is trading just under 25% away from its all-time high it made last month.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 8 analysts offering 12-month price targets, the average price target for WWE’s stock is $107.75. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $75.91.
AEW is owned by Tony Khan, the son of the billionaire owner of the Jacksonville Jaguars. He has helped bring in some former WWE superstars, Chris Jericho and Cody Rhodes, to help build hype and become the faces of the brand. WWE has been dealing with some headwinds as of late, with new entrants into the entertainment sports space and a sub-par first quarter earnings call. Investors in the company should look to WWE’s next earnings call on July 28th for fresh news on the company.