Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

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Can the WWE Survive?

World Wrestling Entertainment (NYSE: WWE) has been on a wild ride lately. The company shut down its US streaming service, got actual competition for the first time in decades, and faces backstage chaos.

American wrestling fans are griping about the decision to move all of WWE’s video content to Comcast’s (NASDAQ: CMCSA) Peacock platform. The WWE (WWE) left streaming because it lacks the resources to compete with giant companies such as Netflix (NFLX), Nick Khan told Recode Media’s Peter Kafka.

Nick Khan is WWE’s President & Chief Revenue Officer. Khan is no relation to AEW President Tony Khan. Nick Khan is reportedly WWE’s most important executive after CEO Vince McMahon.

Can WWE compete with AEW?

WWE’s biggest current problem is the privately held All Elite Wrestling (AEW). AEW is the first company to compete directly with WWE since the demise of World Championship Wrestling (WCW) in 2001.

In particular, AEW has two cable TV shows Dynamite and Rampage, both of which air on Time Warner’s TNT network. Rampage competes directly with WWE’s Smackdown on Friday nights. That will remind older wrestling fans of the infamous Monday Night Wars of the 1990s in which WCW’s Nitro fought WWE’s Raw for ratings.

Rampage was the third highest rated TV show on 27 August 2021 with 722,000 viewers, Wrestling Observer estimates. However, Smackdown was the number two rated show. Nielsen Smackdown attracted 2.25 million viewers on the Fox broadcast network on 27 August, Wresting Inc. reports.

Rampage was the top rated cable show in the coveted 18-49 demographic on 27 August. Impressively, Rampage’s ratings were 20% higher than an NFL preseason game on ESPN, Wrestling Observer notes. Hence, WWE has an AEW problem, but the National Football League could have a bigger AEW problem.

I think AEW will be tough competition for WWE because Tony Khan has hired major stars and recruited some of the hottest young talent. The current AEW roster includes Chris Jericho, the Lucha Brothers, Jungle Boy, Cody Rhodes, Dustin Rhodes, Kenny Omega, Johnny Moxley (WWE’s Dean Ambrose), CM Punk, Darby Allen, the Young Bucks, MJF, and the hottest female wrestler Dr. Britt Baker just to name a few.

Can WWE compete with AEW?

I think the WWE (NYSE: WWE) is having trouble competing with AEW. Notably, the WWE locker room and TV appear to be in chaos.

For example, Vince McMahon ripped up the script for the 30 August Raw and changed all the matches before the broadcast, Wrestling News Company claims. Strangely, none of the advertised matches appeared on the show. That chaos comes after the insane Summerslam pay-per-view in which one major star Sasha Banks never appeared.

It confused fans when major matches, including a Miz vs. John Morrison showdown, did not air. Interestingly, Raw’s rating fell to 1.907 million viewers for 30 August. Wrestling News estimates.

Yet those ratings are tremendous in today’s television market The Wrap estimates the top cable channel Fox News averaged 2.5 million prime time viewers and 1.4 million all-day viewers in August 2021.

Is Today’s WWE WCW all over again?

I think the ratings show WWE is still a reliable TV product. However, I think WWE has a problem. The problem is that WWE has no popular young stars comparable to AEW’s Brit Baker, Darby Allen, Sammy Guevara, Jungle Boy, and MJF.

Notably, WWE has to bring back older stars such as John Cena, Goldberg, Becky Lynch, and Brock Lesnar to attract attention. Meanwhile, older stars such as CM Punk go to AEW to wrestle Jungle Boy and Darby Allen. Interestingly, Tony Khan credits Darby Allen for much of AEW’s success, Wrestling Inc. reports.

Consequently, I think the situation at WWE reminds me of WCW before its demise back in 2001. That is a large corporate wrestling company top heavy with older stars incapable of attracting younger fans with chaotic management and booking. Time Warner pulled the plug on WCW because it could not compete with WWE.

Does WWE Make Money?

Okay, so the WWE is in a shaky position, but does it make money? The answer is WWE makes a little money.

For example, WWE reported a quarterly gross profit of $98.7 million and a quarterly operating income of $46.35 million on 30 June 2021. The quarterly operating income fell from $55.75 million on 30 June 2020, while the quarterly gross profit rose from $95.50 million on 30 June 2020.

In comparison, the quarterly revenues grew from $223.41 million on 30 June 2020 to $265.54 million on 30 June 2021. Interestingly, Stockrow estimates the WWE revenues grew by 18.86% in the quarter ending on 30 June 2021. That was the first quarter WWE held live shows in over a year because of COVID-19. Comparatively, the revenues fell by 16.89% in the quarter ending on 30 June 2020.

The WWE is generating less cash

The WWE is generating less cash. Its quarterly operating cash flow fell from $74.81 million on 30 June 2020 to $19.51 million on 30 June 2021.

Dramatically, the quarterly ending cash flow fell from $266.09 million on 30 June 2020 to $22.18 million on 30 June 2021. Note, $186.57 million of the 30 June 2020 cash came from $186.57 million quarterly operating cash flow.

However, the WWE is paying debts. It reported a -$30.72 million quarterly financing flow on 30 June 2021. Importantly, the WWE’s total debt fell from $810 million on 30 June 2020 to $617 million on 30 June 2021.

The WWE has less cash. Its cash and short-term investments fell from $548 million on 30 June 2020 to $443 million on 30 June 2021.

What Value Does WWE Have?

Mr. Market seems to think World Wrestling Entertainment (WWE) has some value left. He paid $52 for WWE stock on 3 September 2021. Additionally, the WWE share price rose from $44.36 on 2 September 2020.

However, WWE’s value fell over the last year. For instance, the Total Assets fell from $1.295 billion on 30 June 2020 to $1.116 billion on 30 June 2021. I suspect the assets fell because WWE abandoned its standalone streaming service – the WWE Network.

Yet WWE’s stock retains some value despite the loss of assets. In fact, WWE will pay a 12₵ quarterly dividend on 27 September 2021. Overall, WWE shares offered a 48₵ forward annualized dividend and a dividend yield of 0.92% on 2 September 2021.

Thus, for all of its problems, I think WWE remains what it always has been an interesting stock with a little value. I advise investors to avoid WWE but like WWE’s wrestling, the company’s stock is still fun to watch.