This weekend, World Wrestling Entertainment (WWE) will host its biggest event of the year: Wrestlemania 38. The two-day event is the "Super Bowl" for the professional wrestling company and presents as good of a time as any to consider investing in the industry leader.
Here are three reasons why WWE has the long-term potential to be a title winner for your portfolio.
1. Live events are back
While Wrestlemania is WWE's biggest live event in terms of its streaming audience and sponsorships, the company makes its most revenue from two annual events in Saudi Arabia for an estimated $50 million per event. Due to COVID, the Saudi Arabia events were limited to once per year in 2020 and 2021, meaning the company missed out on roughly $100 million in revenue. WWE expects to continue its regular schedule of two annual events in Saudi Arabia, despite a political backlash, until at least the end of its current contract with its government in 2027.
Image source: Getty Images.
Before the pandemic, excluding Saudi Arabia and its lower-tier developmental events, WWE produced 310 shows per year for roughly $125 million in revenue. Last year, using the same criteria, the company produced only 101 events for approximately $58 million in revenue. Also, compared to 2019, the company's live events in North America, its largest market, saw attendance up 35% and its average ticket prices up 18%.
Now in 2022, as COVID restrictions subside, management expects a full slate of live events. If 2021 events are any indication, the company should see higher live events revenue than in 2019.
2. Record revenue
Live events made up about 5% of WWE's total revenue in 2021, as the company's primary source belongs to its TV licensing deals. The company's media division produced $936 million in revenue from TV properties like Raw, Smackdown, and the WWE Network. Those deals include separate, multiyear contracts with top media players, including Comcast, Disney, and Fox.
WWE's current deals also have a yearly contractual escalation of rights fees, resulting in a higher revenue base each year. And in the long term, sports (whether they're real or not) licensing deals tend to go up significantly.
WWE's media revenue rose from $511 million in 2017, amounting to an 87% increase in the last five years. And it is well-positioned to garner further lucrative licensing deals as the streaming wars heat up and declining traditional TV networks value sports viewers for advertising. Look no further than Amazon's recent $1 billion-per-year contract with the NFL to exclusively stream the league's Thursday Night Football on Amazon Prime.
3. Share buybacks and dividends
Since its initial public offering in 1999, WWE's outstanding share count has steadily risen from roughly 58 million basic shares to more than 78 million in 2019. However, in 2019, the company changed course with a $500 million share repurchasing program, reversing a two-decade-long trend. WWE has about $250 million remaining to continue share repurchases, and its basic share count sits at about 76 million. Whether share buybacks are a good use of capital is up for debate, but WWE's history of diluting its outstanding share count may be finished.
Many investors may not think of WWE as a dividend stock, but the company has been paying one since 2006. It currently provides a $0.12 quarterly dividend, which results in a yield of about 0.75%. All told, the company returned $202 million in capital to shareholders in 2021, or 4% of its current $4.7 billion market cap.
Is WWE a buy today?
The stock has been doing well -- up about 183% over the past five years, nearly doubling the S&P 500's return over the same period. While WWE has relatively new competition in All Elite Wrestling (AEW), a well-funded start-up, its established 40-year-plus history as the industry leader positions the company well to continue expanding its live events and licensing segments.
Keep an eye out for how WWE's return to a full live event schedule goes in 2022 and future licensing deals with its popular IP. If the professional wrestling company's live events segment gets back to pre-pandemic levels and its licensing agreements rise over time, look for its stock to continue its dominance.
