World Wrestling Entertainment, Inc. (NYSE:WWE) stock had a very bad day on Monday, April 4. From 3:00 p.m. to 3:30 p.m., it plunged 10.6%. The good news is that the double-digit drop in half an hour did not turn into a trend. Since then, WWE stock has climbed up more than five percent.
Some investors are still worried about the stock’s scary ride on Monday. But don’t worry; with its record main event, WWE stock could see further gains down the road.
This Could Be Huge for WWE Stock
For those who don’t watch wrestling, WWE just had its biggest event of the year—WrestleMania. WWE produces this annual pay-per-view event usually between mid-March and early April. The first event was produced in 1985. The most recent one was WrestleMania 32—held at the AT&T Stadium in Arlington, Texas on Sunday, April 3.
Over the years, WWE has built a huge fan base around the world. Its programming has reached more than 650 million homes worldwide in 25 different languages. This year’s WrestleMania has just proven to be another moneymaking machine for the company.
The event set a new WWE attendance record of 101,763, with fans from all 50 states and 35 countries joining at the AT&T Stadium. Unsurprisingly, WrestleMania 32 also turned out to be the highest grossing live event in WWE history with $17.3 million in revenue. To put it in perspective, the previous record for gross revenue was $12.6 million, held by last year’s WrestleMania 31. That means WrestleMania 32 achieved a 37.3% year-over-year growth rate in gross revenue. (Source: “WrestleMania Sets All-Time Attendance Record,” WWE, April 3, 2016.)
Of course, one great event is not going to be enough to pump up the stock. But what if the event can boost the company’s subscriber numbers?
In fact, that’s exactly what happened. On the day after WrestleMania 32, WWE announced that WWE Network—its digital subscription service—has reached a record 1.82 million total subscribers. (Source: “WWE Network Reaches Record 1.82 Million Subscribers,” WWE, April 4, 2016.)
Both domestic subscribers and international subscribers reached record levels. Total domestic subscribers surged to 1.390 million, representing a 24% increase compared to the day after last year’s WrestleMania event. Total international subscribers grew a more impressive 126% year-over-year to 434,000.
What triggered the decline on Monday was the number of domestic paid subscribes, which declined one percent year-over-year from 1.123 million to 1.109 million. It may have something to do with WWE introducing a free one-month trial that includes WrestleMania.
Still, if you look at the big picture, things are pretty solid. WWE’s total paid subscribers increased 11% year-over-year to 1.454 million.
Going forward, the company is confident that WWE Network’s subscriber base will continue expanding. WWE forecasts that the range of average paid subscribers for the second quarter of 2016 will be 1.48 million to 1.55 million, which would represent a year-over-year increase of between 22% and 27%.
One day after WWE’s announcement, Evan Wingren, analyst at Pacific Crest Securities, reiterated his “Overweight” rating on WWE stock with a price target of $20.00. That would imply a 19.3% upside potential. (Source: “WrestleMania Exceeded Even PacCrest’s Expectations: WWE Worth $20/Share,” Benzinga, April 5, 2016.)
The analyst said, “despite lower near-term subscribers, we recommend owning WWE for its leadership in navigating the shift to on-demand, strong demand for its content and dominant position across multiple platforms.” (Source: Ibid.)
The Bottom Line on WWE Stock
There you have it. As viewers embrace the idea of on-demand video streaming, WWE network could see substantial subscriber growth in the future. And that could be a huge catalyst for WWE stock.