Wall Street Analysts Optimistic about Endeavor's Acquisition of WWE

Wall Street analysts are optimistic about Endeavor Group Holdings' (EDR) recent announcement to combine its mixed martial arts company, Ultimate Fighting Championship, with World Wrestling Entertainment (WWE). The move comes after months of speculation and aims to consolidate negotiating power for streaming platforms seeking to showcase live events.

While some WWE investors were expecting an all-cash offer that would provide an immediate payout when the deal closes, the companies have instead decided to offer existing WWE shareholders stock in the combined company, which will be traded under the ticker symbol TKO. This decision caused WWE stock to decline by 2% to $89.30 on Monday.

Notably, Citi analyst Jason Bazinet holds a more positive view on the new company, claiming that the market is being "Too Bearish" about its prospects. Bazinet maintains his Buy rating on WWE stock with a price target of $110, as he anticipates investors shifting their attention to WWE's U.S. rights renewal. In 2024, WWE will negotiate for its flagship wrestling programming, Raw and Smackdown.

Furthermore, Loop Capital's Alan Gould also expresses confidence in WWE's stock, reiterating his Buy rating and projecting a value of $115 per share by early 2025. Gould highlights the combined company as a "powerful sports rights company," emphasizing UFC's domestic TV rights renewal expiring in 2025, which he believes will lead to a significant increase in profitability.

BofA Global Research Offers Positive Commentary on Endeavor Deal

BofA Global Research analyst Jessica Ehrlich, who maintained a Buy rating on Endeavor, has provided positive commentary on the deal. She describes the combination as a "pure-play sports IP ownership entity" in a segment that is expected to see increased capital inflows.

WWE Stock Downgraded to Hold by Benchmark Analyst

Benchmark analyst Mike Hickey has downgraded WWE stock from Buy to Hold. Hickey's estimate for the fiscal 2026 enterprise value is 13 times the combined company's adjusted Ebitda. This valuation does not account for potential cost savings and media rights opportunities. Moreover, Hickey believes WWE's current EV/Ebitda valuation of 19.4 is too high.

Hickey's cautious stance is due to the aggressive $21.4 billion valuation placed on the combined company. He believes that most of the potential price increase for shares has already been factored into this valuation. Additionally, WWE's stock price has already risen by approximately 26% this year due to expectations of a potential sale and growth in domestic rights fees.

However, despite Hickey's concerns, the market seems to side with the optimistic outlook. WWE stock experienced a 4% increase, reaching $93.09 on Tuesday shortly after the market opened.