World Wrestling Entertainment, Inc.'s (NYSE: WWE) stock crashed more than 20% on Friday after the company dismissed two long-time executives and cut its 2019 earnings guidance ahead of its fourth-quarter report due out on Feb. 6.
WWE announced Co-Presidents George Barrios and Michelle Wilson are leaving the company effective immediately. In addition, WWE said it expects to report $180 million in full-year adjusted OIBDA, the low end of its guidance range of $180 million to $190 million. Analysts had been anticipating $186.6 million.
In a statement, WWE CEO Vince McMahon thanked Wilson and Barrios for their 10-plus years of contributions.
“I am grateful for all that was accomplished during their tenure, but the Board and I decided a change was necessary as we have different views on how best to achieve our strategic priorities moving forward,” McMahon said.
Wall Street Weighs In
Several Wall Street analysts weighed in on WWE stock following the unexpected executive departures and the guidance cut.
Rosenblatt Securities analyst Bernie McTernan said the huge sell-off is an indication that investors are concerned WWE is on the brink of another large investment cycle. McTernan said required investment levels are the most likely cause for disagreement between management and the board. Without more clarity from the company about the path forward, it’s difficult to determine at this point whether or not the sell-off is a buying opportunity.
“Absent a dilutive deal on the way, we believe the company should send a signal to the market by actively buying back stock at these levels,” McTernan wrote in a note.
Rosenblatt has a Neutral rating and $77 price target for WWE stock.
Other Analysts React
Needham analyst Laura Martin said Barrios and Wilson served an important role at WWE over the past decade.
“We believe that much of the economic value creation by WWE over the past few years can be credited to the collaboration between visionary founder Vince McMahon with data and ROI disciplines imposed by professional managers Barrios and Wilson,” Martin wrote.
Needham has a Buy rating and $88 price target for WWE stock.
Several other Wall Street firms adjusted their ratings for WWE following the news:
- Morgan Stanley cut its rating to Equal-Weight, and set a $54 price target
- Evercore ISI cut its rating to In-Line and set a $50 target.
- Loop Capital cut its rating to Hold and set a $50 target.
Investors will likely get some clarity about the disagreement between management and the board on WWE’s earnings call next week. However, with WWE shares already down 41% in the past year, a significant amount of negative news appears to already be priced into the stock. There is a distinct possibility of a near-term relief rally if WWE’s 2020 guidance isn’t as bad as feared.
WWE's stock traded around $48.41 per share at time of publication.
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