After going public in 1999, World Wrestling Entertainment (NYSE: WWE) stock drifted lower over a number of years. However, more recently, things have been much more positive for those invested in WWE shares.
So, how would I have fared if I’d invested in the company 10 years ago?
The stock has been a smash hit
A £5,000 investment in 2012, adjusted for the exchange rate at the time, would have bought me around 980 shares at $8.13 each. Today, the WWE share price is $78.11, so those 980 shares would be worth approximately £67,700!
But that’s not all. The company pays a modest dividend too, which has been set at an annual rate of $0.48 per share for over a decade. This means that I would also have received over £4,000 in dividends on top of my gains.
Of course, it would have been fortunate that the value of my investment was stored in US dollars over the last decade, given the depreciation of pound sterling.
The company today
WWE broadcasts to more than 180 countries in 30 languages and its original programming is watched by approximately 11 million fans in the US every week. It has 91.5m subscribers to its YouTube channel, which is more than the UFC (mixed martial arts), NBA (basketball), and MLB (baseball) combined.
Management has been ruthlessly efficient at merchandising and licensing every aspect of the WWE franchise. The company has two weekly live programmes, Raw and SmackDown. It licenses these out to various streaming services and television networks around the world, such as Comcast, Disney, and Fox.
Revenue in the second quarter this year was $328.2m, an increase of 24% over last year. Operating Income was $69.3m, an increase of 50%.
During the first six months of this year, the company generated $413m through its licensing deals, which is about 80% of its total revenue. This is stable and growing recurring revenue, and probably explains the stock’s rise in value in recent years.
Leadership controversy
Vince McMahon was CEO of WWE for 40 years, during which time he outcompeted a collection of regionalised wrestling promotions to create a unified global enterprise.
He was the literal definition of a ‘hands-on’ leader, often appearing in the ring himself. Self-styled as ‘the boss’, he played a central part in the narratives and rivalries between the wrestlers. And fans loved it when he got his comeuppance between the ropes.
But McMahon stepped down this summer after allegations of misconduct. He still holds majority voting control though, and his daughter has taken over as co-CEO.
Should I buy the stock?
Critics argue that the company’s best days are behind it. But WWE has faced many dips in popularity over the decades, and has always managed to reinvent itself and attract new generations of fans.
It’s certainly a unique company, though I think it may already have picked much of the low-hanging fruit available in terms of growth. I don’t see the shares going up as much again over the next decade.
Plus, it now has a price-to-earnings (P/E) ratio of 30, which I feel is quite pricey in today’s jittery market. I think there are better alternatives for my portfolio.
