World Wrestling Entertainment, Inc. (WWE) is an integrated media company broadcasting in 30 languages to more than 145 countries. They provide television, live events and pay-per-view specials. WWE also licenses more than 200 consumer products in 50 countries. They have partnerships with major retailers, including Walmart, Target, GameStop and Toys ‘R’ Us. The company plans to release nine films through 2012. The films will feature well-known actors and actresses in lead roles supported by WWE Superstars. They recently competed production on three films: ‘Legendary,’ ‘Knucklehead’ and ‘8th Grade.’ I see the company’s new film projects as a strong catalyst to improve revenues and earnings.
“Recently WWE reported solid 3Q results, with profits up 60% to $14.3 million, or $0.19 per share. I’m encouraged by the improvement in movie revenue, $7.6 million, vs $3.0 million last year. The overall revenue weakness was related to the weak economy and new wrestlers. Longer- term, the company’s new toy provider, Mattel (MAT), will boost profits because of their solid distribution channels. Over the last three years, sales have grown by an average of 21.8% annually and earnings by 15.6%. My earnings estimates are $0.95 for 2011 and $1.05 in 2012. Applying a P/E of 20x earnings makes my 12-18 month target price $21.00 a share, a 50% gain. Add in the approximately 9% dividend and it’s a 60%-plus total return.”
Eric Dany, Stock Prospector, 12/10