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Why World Wrestling Entertainment Stock Ticked Up 3% in 2021

By Jeremy Bowman – Jan 12, 2022 at 8:28AM

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It was an up-and-down year for the entertainment company.

What happened

Shares of World Wrestling Entertainment (WWE 0.73%) finished 2021 up 3%, according to data from S&P Global Market Intelligence, in an up-and-down year as the company continues to build its streaming business.

As you can see from the chart below, shares were volatile, moving throughout the year before falling at the end of 2021 to finish essentially unchanged.

WWE Chart

WWE data by YCharts.

So what

WWE shares surged through January of 2021, gaining 20% in line with strong gains among growth stocks as it announced a new streaming partnership with Comcast's Peacock. However, the company also forecast operating income before depreciation and amortization to be flat in 2021, which briefly weighed on the stock.

A scene from a WWE event

Image source: Getty Images.

The stock dove on its fourth-quarter 2020 earnings report, falling 12% on Feb. 5, 2021, after the report came out. Revenue declined 26% to $238.2 million, reflecting a lack of ticketed live events as well as the cancellation of a large-scale event in Saudi Arabia that normally takes place during the quarter. That missed estimates at $245.7 million. On the bottom line, adjusted earnings per share fell from $0.78 to $0.24, below expectations at $0.30.

The stock recovered those losses in March on a rebound in growth stocks and in hopes for the reopening. In its first-quarter earnings report in April, the company topped estimates with a 9% decline in revenue to $263.5 million as it again suffered from a lack of live events, but that beat estimates at $255 million. On the bottom line, it reported an improvement in adjusted earnings per share from $0.31 to $0.51, a promising sign that was well ahead of the consensus at $0.22.

After a brief pop in June, the stock slumped in July, despite another quarterly earnings report that beat on both top and bottom lines. The company also returned to revenue growth as it lapped weakness from the lockdown quarter in 2020.

Finally, the stock took a step back in November as it missed revenue estimates in its third-quarter earnings report. From there, it slumped through the rest of the year, though there was little news out on the company.

Now what

WWE is a unique entertainment asset with a loyal fan base and no direct substitute, giving it some appeal to investors and as a potential acquisition target. The company is now pivoting away from its direct-to-consumer strategy to functioning as a content studio, providing material for distributors like Peacock and Fox. That turn may have disappointed some investors, but it could prove lucrative over the long run if the company can attract a big-enough audience. 2022 will be the best opportunity yet for the company to showcase this strategy as the economy should continue to normalize despite headwinds from the omicron variant.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Comcast and World Wrestling Entertainment. The Motley Fool has a disclosure policy.

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