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The Short Case For World Wrestling Entertainment

Amvona profile picture


  • Financials Performance trending down for multiple years - excessive dividends and losses eroding financial profile rapidly.
  • Execution has been sub-par - management consistently under-delivers.
  • Shares probably overpriced by at least 275%.

The business World Wrestling Entertainment (NYSE:WWE) is engaged in is sport or show (or maybe both) designed to manufacture emotions - to this end, the shows are replete with the kind of drama that apparently opens wallets.

If the production of emotions however is transferred to the investing public and elicits the same visceral response to the stock as it does to the company's events, then there ought to be significant reason for caution on the long side, for sound investment policy has nothing to do with emotions.

Yet, when examining not only the stock price, but the commentary that can be found online regarding the justification for the significant premium the shares currently command, it is hard to characterize the sentiment as anything other than speculation based on what appears to be the very temporal popularity of the issue.

A few questions that might be worth asking:

1. If one projects into the future ten years and looks back at WWE shares today and the corresponding premium, how would the opportunity look? Will WWE as a company seem as promising then as it does now? For that matter, is the company really as auspicious as it seems today?

2. Is the current popularity of the company's product easily translatable into profits? If yes, why has profitability been unremarkable despite a 34 year history and a virtual monopoly?

Is the company going to bring about a significant change (against historical averages) in its profitability with either its direct model or with a renewed network contract?

3. Even with a more lucrative network contract, say for example at 2x current revenue run rates, will the model translate into 2x profitability? And if so, would the valuation ratios make sense at such levels?

Putting aside the rising COGS which is at about ~64%, or

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Amvona profile picture
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