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World Wrestling (WWE) Loses Ground: Should You Dump?

Zacks Equity Research
Updated

Are you still holding shares of World Wrestling Entertainment, Inc. WWE and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock will take a U-turn in the near term. In fact, the stock has declined 8.3% in the past three months, underperforming the Zacks categorized Movie/TV Production/ Distribution industry which has witnessed a gain of 9%. Let’s delve deeper and try to find out what is taking this Zacks Rank #4 (Sell) company down.

 

 

World Wrestling Entertainment disappointed investors with a negative earnings surprise for the second consecutive quarter. After witnessing a negative earnings surprise of 87.5% in the second quarter, it again missed the estimate by 22.2% in the third quarter. The company reported earnings per share of 14 cents for third-quarter 2016, flat year over year but missed the Zacks Consensus Estimate of 18 cents. The company’s results were negatively affected by decline in revenues from Media division.

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Recently, the company reiterated its 2016 adjusted OIBDA and operating income guidance. Moreover, the company revised its anticipated range of average paid WWE Network subscribers for the fourth quarter. However, the guidance failed to impress investors, as the stock has declined 5.3% ever since the company echoed its fourth-quarter guidance.

World Wrestling Entertainment continues to anticipate adjusted OBIDA of nearly $20 million to $24 million and operating income of $12 million to $16 million for fourth-quarter 2016. In the fourth quarter, the company expects a minimum of 1.40 million average paid subscribers to WWE Network. Earlier, it had projected average paid subscribers of 1.40 (plus or minus 2%).

Let’s look at World Wrestling Entertainment’s earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company. In the past 30 days, the Zacks Consensus Estimate for 2016 and 2017 has declined by 6.3% and 7.7% to 45 cents and 60 cents, respectively. Moreover, over the same time frame, the consensus estimate for the fourth quarter has moved down 8.3% to 11 cents.

World Wrestling Entertainment which shares space with Eros International Plc EROS operates in the highly competitive market of entertainment video. The competition in the entertainment video space has increased significantly and the company expects it to become more intense in the coming days. Many companies which have entered this market have better financial stability and can offer more technology as well as marketing resources than WWE. Further, these competitors are well positioned to aggressively price their offering.

Stocks to Consider

Better-ranked stocks worth considering in the retail sector include The Liberty Media Group LMCA and NTN Buzztime, Inc. NTN. Liberty Media Group sports a Zacks Rank #1 (Strong Buy) while NTN Buzztime carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Media Group shares have surged more than 68% in the past six months.

NTN Buzztime has reported positive earnings surprise in the trailing four quarter, with an average beat of 23.4% and also has a long-term earnings growth rate of 20%.

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NTN BUZZTIME (NTN): Free Stock Analysis Report
 
WORLD WRESTLING (WWE): Free Stock Analysis Report
 
EROS INTL PLC (EROS): Free Stock Analysis Report
 
LIBERTY MEDIA-A (LMCA): Free Stock Analysis Report
 
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Zacks Investment Research