That current business results are more negative than positive, but because of the potential for 2015, the stock has skyrocketed, peaking a few days back at $24.96 per share. It has declined to $23.71 at press time, the day after the launch of the network. That was bound to happen because Wall Street is big on the “buy on speculation, sell on results” axiom. The real test of the stock will come in April, or perhaps early May, when the network subscription figures will be announced and the U.S. TV contract is finalized. The market value of the company is now at $1.78 billion, the highest mid-week figure in more than a dozen years.
The story of the reaction, and the business itself going forward, is that everything is changing. Under normal circumstances, a major drop in profits even with increased revenues would cause what had been a stagnant stock to drop even lower. There would be concern over the falling divisions like merchandise and DVDs, and less profitable PPVs, as well as house shows for the most part being stagnant.
But the stock is skyrocketing because for the entire business going forward, if the right TV deal comes in, the usual major revenue streams become almost insignificant. It’s all television deals and network success. And if TV revenue doubles, they can afford a network failure as nothing more than as a minor black eye while they continue to make more money than ever. And if they do get the TV deal they are hoping for, it will be a long-term deal most likely, and the numbers are guaranteed, barring a complete collapse which simply isn’t going to happen.
The TV deal will be decided in negotiations over the next few months, and there will be an answer in the key U.S. market. The right answer, and the company is home free, at a different level than ever before. The stock is soaring because people are looking at that doubling or tripling television money, which would mean $140 to $280 million, in new revenue without any increase in costs, because it would be the same programming they are already doing. Add that to revenue, and much to the bottom line, and you can see the difference. Some people look at the NASCAR deal at $820 million a year, and WWE’s package actually gets more eyeballs during the year, and think that’s what WWE is now worth on the open market. If they get even half the deal NASCAR got in their new U.S. negotiations, the network can be a total failure and they’re home free. If they only get a modest increase, then the network success becomes paramount.