Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of World Wrestling Entertainment were crying uncle today after tumbling as much as 48% as investors weren't pleased with a new TV deal and outlook it announced.
So what: The professional wrestling organization said it signed a new deal with NBCUniversal for undisclosed financial terms, but based on analyst estimates, the deal is not worth nearly as much as investors had expected. Benchmark analyst Mike Hickey said revenue would increase just 50% whereas World Wrestling Entertainment had previously said that the value of the contract would double or triple. Investors also seemed worried about the company's outlook for its new WWE network, which it said would require 1.3 million to 1.4 million subscribers to offset the cannibalization of its pay-per-view business.
Now what: In the outlook, WWE said the subscriber rate "could vary materially based on a variety of factors," and said having 1 million subscribers by the end of this year would lead to a net loss of $45 million to $52 million. While that projection seemed to scare investors away, the company's outlook for 2015 was much more favorable as a subscriber base of 2 million to 2.5 million would drive a net income of $57 million to $105 million. WWE is clearly taking a risk with the move to its own network and Wall Street dislikes uncertainty, but that decision could pay off handsomely in the long run if the network takes off. Given that, today's slide may offer a chance to pick up shares on the cheap before they recover.
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The article Why Shares of World Wrestling Entertainment, Inc. Got Pinned Today originally appeared on Fool.com.Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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