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, www.amvona.com (57 clicks)
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Summary

  • Shares of World Wrestling Entertainment fairly priced between $8.25 and $11.88 - OTT network subs don't cover costs.
  • Losses likely to snowball beyond Q1 2014.
  • Existing subs may cancel post historical largest PPV event.

Shares of World Wrestling Entertainment (NYSE:WWE) are fairly priced between $8.25 and $11.88.

On March 17th, 2014, Amvona published Lemelson Capital Management's investment thesis "The Short Case for World Wrestling Entertainment."

The shares have lost approximately 26% of their value in the 16 trading days since publication. On April 7th, 2014, ValueWalk published "Amvona Short Call Sends WWE Tumbling" stating:

World Wrestling Entertainment, Inc. (NYSE:WWE) shares were hammered today, briefly trading below $22 as news of Amvona/Lemelson Capital Management's report making the case to short WWE started to gain greater currency. The report was released almost three weeks ago and as of 1 PM ET today, the stock is down more than 20%. It's also worth noting that the Amvona fund was up 60% last year after fees.

Recent events point to further losses

  1. Company already expects at least 12 M loss in Q1 2014.
  2. Forward P/E ratio of ~20 (based on estimates) highly speculative and not likely to materialize. Trailing P/E ratio over 607.
  3. Subscriber numbers announced on April 7th do not support costs of WWE network - therefore OTT network operating at an ongoing loss in addition to extraordinary start-up costs.
  4. New subscriber acquisition will be difficult now that largest promotional event (WrestleMania) is past.
  5. Serious doubts exist that subscribers will continue subscription that exceeds the cost of other media streaming services such as Netflix post major PPV event.
  6. Important footnote on WWE press release affirms:

Current subscriber number does not account for potential failures to comply with subscription terms and six month commitment

The Underlying fundamentals of the company are not fixed and the same management team that has eroded earnings year after year is still in place.

Conclusion

Despite the recent drop in price, shares of WWE represent far too much risk, and continue to be at least 100% overvalued. Weakened financial profile likely to worsen in 2014, leaving the company as nothing more than a financial shell upon which to speculate.

Source: Update: The Short Case For World Wrestling Entertainment