WWEconomics: Stock price analysis, Vince interview, TV deal, and more
Submitted by Mr. Tito on Saturday, June 21, 2008 at 3:12 PM EST



DISCLAIMER: This report is put together for entertainment purposes only. Readers should invest at their own risk!

Welcome back to WWEconomics, the financial look at the WWE. Looking back at the prior issues of WWEconomics and/or Economic Bodyslam (the former name), you'll find that this report was ABSOLUTELY CORRECT on the price of the stock. If you run a Google search on prior reports, I suggested that the stock would hit a major peak around Wrestlemania, fail to break the $20 glass ceiling, and come back down to earth during what is considered the "dead zone" for the WWE. From Royal Rumble to Wrestlemania, that is the highest revenue generating period. After Wrestlemania, the weather gets warmer up North and individuals have more options for their entertainment purposes. Other investment firms foolishly predicted something around $21. They obviously don't know the ins and outs of the WWE, nor have they seen the history of the stock.

Looking back, here is the stock's performance for the past 3 months:



As you can clearly see, the WWE stock peaked in early April just after Wrestlemania and then trended downward. At close on Friday, the stock was priced at $15.77. Additionally...

52 Week High: $19.86
52 Week Low: $13.35

Moving foward, we find this stock to stay within the middle of its 52 week range. In the short run, if you're looking for a bargain, take a "wait & see" approach to see if this stock drops further. In my opinion, this stock is a solid buy when under $16 because at a certain point, this stock pays a solid dividend. It can also be suggested that the WWE is in "coast mode" these days. They appeared to have cleaned up the drug problems of last year and have improved their public image. The main issue with the WWE is hoping to find means to obtain the casual fans again. Even with the $1 million giveaway, the WWE is trending towards the low end of the 3.0's for its mothership show, Monday Night RAW (and again, as we keep suggesting, WWE fans tend to drift away after Wrestlemania).

Besides post-Wrestlemania, the WWE stock is certainly influenced by the rest of the market. Thanks to record high levels of inflation and banks making bad mortgage loans, the economy has certainly taken a hit and the market has been in a bearish (or selling) mode lately. Investors are jumping into more safe-havens, such as the bond market, or what's appearing to be a very lucrative commodity market (which includes oil). In terms of inflation, when more of your income is dedicated to energy costs and rising food prices, you have less left over to spend on other types of goods as shown by the first quarter GDP report. For entertainment purposes, high levels of inflation are keeping individuals away from attending more Major League Baseball games.

Does this affect the WWE? Potentially, and this loss-of-purchasing-power effect has certainly played a role on the WWE's potential profitability in 2008. However, it should be noted that the WWE is thick in children and 18-25 demographics. Their income isn't exactly going towards real life bills such as housing, utilities, or families. Thus, spending towards WWE goods should remain stable IF not gain during these slower times. Thus, if you're an investor, this could be one of those slowdown-proof stocks. Provided the solid business that the WWE has done for the past 2 quarters, you have no reason to believe otherwise. Individuals in the United States don't normally give up their entertainment, even during the worst of times.

If you bought when I strongly recommended buying earlier this year when the stock was under $14 and yet you didn't sell in March/April... Keep a hold on the stock. WWE pays a 9.00% dividend and that's an investment that will pay. Assuming the WWE doesn't have another Chris Benoit fiasco on their hands, they should be solid until a competitor challenges them. The WWE has good accounting practices, new and innovative revenue streams (international, 24/7, internet, and DVD's), and they are an established brand. Sorry TNA fans, you're not in the picture yet... Pulling 0.9 ratings in prime time in recent weeks says "you're not a competitor" despite all of the free agents you've obtained lately. Until a rise of a contender, the WWE is going to do solid business for the next few years. Yo-yo'ing between $10 and $20 is what should probably be expected from here on out. Rising during Wrestlemania time, declining during the summer months, and then growing again when trending towards Wrestlemania. Very, very simple WWE stock analysis.

THE SKINNY: We recommend "Hold" for current stockholders... just wait again until next year's Wrestlemania peaking to potentially sell the stock. Until then, enjoy a fantastic WWE dividend, especially in light of banks and other financial institutions cutting their dividends. As for new buyers... We say "wait and see" for a potential bargain... The stock market has digested bad news with rising energy costs, inflation, and the unexpected jump in the unemployment rate (mostly due to a jump in teenage unemployment). Right now, a lot of assets and stocks are at bargain prices and when investors fully realize that, the stock market will be back on an upswing. Watch the stock and potentially consider buying, if you dare, when under $16 just to enjoy a solid dividend return on your investment. It's presently paying $0.36 per share, per quarter and annualized at $1.44 (9.00%). During these times with financial stocks taking a hit, this may a solid investment. If we get under $15 and especially under $14, we recommend "buy", for you'll get the old "buy low, sell high" technique heading into Wrestlemania.



PHAT NEWS



- Darren Rovell of CNBC interviewed Vince McMahon recently: http://www.cnbc.com/id/25286552

- A director recently sold 3,000 shares: http://www.forbes.com/feeds/ap/2008/06/20/ap5139168.html. Make nothing out of this... Another director bought 25,000 shares last month. The director who sold the shares is a minority shareholder anyway. As you can see by THIS LINK, directors and EVP's sold at the stock's peak during March when the stock was above $18 (thus making lots of money). With recent director moves, it shows either a "hold" or a potential for more share buys in the future if the price continues to decline.

- News about the successful international tour in New Zealand and Australia: http://www.stockhouse.com/News/USReleasesDetail.aspx?n=6945551.

- More great international news... WWE signs new TV deal with India: http://www.rttnews.com/Content/QuickFacts.aspx?Node=B1&Id=631085%20&Category=Quick%20Facts

- Good article that notes that the WWE's CFO mentioned that the company has enough cash to continue the solid dividend payouts: http://www.streetinsider.com/Analyst+Comments/Barrons+Article+Makes+Positive+Comments+on+World+Wrestling+Entertainment+(WWE)/3760513.html

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Just chill... till the next episode.

WrathofTito@yahoo.com








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