Citi Recommends WWE's Stock On Network Subscriber Projections

It’s never an easy decision for a successful company’s management to commit to a change in strategy to keep pace with the times. However, World Wrestling Entertainment, Inc. (NYSE: WWE)’s pivot from a pay-per-view (PPV) model to a subscription-based model has been a huge success, according to Citi analyst Jason Bazinet.

In a new research note, Bazinet says WWE still has some work ahead to replace all its lost revenue with WWE Network subscription revenue, but the subscription model provides a unique opportunity for long-term growth.

“Three years ago, WWE made a smart strategic pivot by migrating from a pay-per-view model to a web-based subscription model,” Bazinet explains.

Related Link: WWE Might Be Interested In Buying Indy Competitor Ring Of Honor To Beef Up Network Programming

By leaving PPV behind, Bazinet says WWE has dodged the bullet of a secular decline in pay TV, set the stage for long-term growth through 2020 and increased the company’s long-term value for potential buyers.

Bazinet mentions Twenty-First Century Fox Inc (NASDAQ: FOXA), Comcast Corporation (NASDAQ: CMCSA) and Formula One as three potential suitors.

WWE’s latest WWE Network subscriber count stands at 1.40 million. Citi estimates that the network will need 1.76 million subscribers to fully replace lost PPV revenue.

Citi has initiated coverage of WWE at Buy and set a $25 price target for the stock.

Shares of WWE are up more than 20 percent year-to-date, and traded recently at $22.57. The company's flagship event, Wrestlemania, takes place Sunday, April 2.

Image credit: Miguel Discart, Flickr