CHICAGO - The exit of a popular CEO at World Wrestling Entertainment Inc comes at a time when the sports entertainer has seen shares rise more than 60 percent since last November, helped by a loyal fan base and aggressive cost cutting.
WWE said this week that Linda McMahon was stepping down as CEO to run as a Republican for the U.S. Senate in Connecticut. She was replaced by husband Vince McMahon, who will remain chairman and is lauded for his creativity and flamboyance.
Some analysts said the company, which stages live and televised professional wrestling matches with names such as Monday Night Raw and Friday Night Smackdown, will struggle near term with recession-weary consumers.
Is it time for investors to move elsewhere?
WWE has largely a middle-market following and consumers are extremely impacted right now in terms of discretionary spending, said Marla Backer, a Hudson Square Research analyst who has a hold rating on the stock.
Any entertainment company is going to be competing with lots of other entertainment choices for eyeballs.
I'm not so sure that they've completely figured out the best entrance strategy in some of these new, emerging markets.
Growth is the biggest challenge, said Michael Pachter, a Wedbush Securities analyst who has a neutral rating on WWE shares. There's an open question whether it's a growth business. Growth in the U.S. is probably not going to happen. Growth internationally is the opportunity.
I don't see growth for the next couple of years. I think it's going to take a while for them to grow again.
STRONG BRAND NAME
What they have going for them is significant brand equity, a very, very loyal and growing fan base and a pretty well articulated growth strategy, Backer said.
There is a good chance that we could see toy sales grow, particularly in international markets, Backer said of a deal starting January 2010 for Mattel to sell WWE toys.
Over the past couple of years, they've put a lot of good people into strategic positions, including George Barrios who's the CFO. It's a vote of confidence in the people they've brought to help run the business, Backer said of Linda McMahon's exit.
I would also wager that (McMahon) is also not leaving 100 percent. She won't be involved on a day-to-day basis, but I'm sure she'll still be there in terms of advising and consulting.
Their current CFO is a stud and so I think Vince is going to get a ton of support on that side, Pachter said. I wouldn't make this into a sell.
They have a great product. They understand who they are and they're not trying to be more than they are. They're committed essentially to paying out all of their profit and all their cash flow to dividend, so it makes it a very nice widows and orphans kind of stock.
They're paying a $1.44 dividend on a $14 stock, so it's essentially a 10 percent return without a whole lot of risk. (Reporting by Ben Klayman; editing by Andre Grenon)