KeyBanc: WWE Still A Buy After Mixed Q3

World Wrestling Entertainment, Inc. (NYSE: WWE) reported Thursday its third-quarter results, which fell short of investor expectations in certain metrics. KeyBanc says the company remains "strategically well positioned" moving forward.

The Analyst

KeyBanc Capital Markets' Evan Wingren maintains an Overweight rating on WWE with an unchanged $104 price target.

The Thesis

WWE's third-quarter report showed a shortfall on revenue and adjusted OIBDA versus the consensus estimate. Wingren said this can be attributed to superior monetization of the company's media content being offset by lower ticket sales and an unfavorable licensing revenue impact from ASC 606, new revenue recognition requirements. The company's EPS beat could be attributed to excess tax benefits from share-based compensation.

Management's full-year guidance remains unchanged, but is based on the assumption the company will proceed with its Crown Jewel event in Saudi Arabia despite heightened tensions between the U.S. and Saudi Arabia. The event is "financially positive" and a key driver of growth although there could be backlash from sponsors, fans or even talent. Management's discussion on the conference call failed to fully address the economic risks with the event.

WWE's new season of "Mixed Match Challenge" on Facebook Watch generated 35 million views, which Wingren said is encouraging as it validates the strength of the company's content and could grow in value.

Bottom line, WWE's stock continues to trade at a favorable risk-reward profile at current levels; Over the coming three to five years, the company has plenty of opportunity to leverage its brand in new international markets.

Price Action

Shares of WWE were trading lower by 5.7 percent Friday to $71.35.

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