EDR - TKO Group: WWE Is Creating A Talent Monopoly

2024-07-15 03:25:01 ET

Summary

• TKO Group Holdings, Inc. is a sports entertainment conglomerate under Endeavor, consisting of WWE and UFC.
• This article discusses TKO's valuation and fundamental metrics, as well as its unique talent acquisition strategy.
• The talent acquisition strategy is key to WWE's growth and for its ability to fulfill future revenue projections and justify its high PE ratio and valuation.
• WWE has set themselves up to outcompete rival brands for talent both from within and outside the existing wrestling scene, which sets them apart from all other rival promotions.

Introduction

TKO Group Holdings, Inc. (TKO) is a sports and entertainment conglomerate and subsidiary of Endeavor (EDR), which also owns IMG . TKO itself is comprised of two elements: WWE and UFC.

YTD, the stock has done very well, outpacing the return of the S&P 500.

Thesis

In this article, I am going to primarily be focusing on an aspect of WWE's business that I haven't seen discussed much and believe warrants close examination. WWE has created, and is still building, a monopoly on talent in the wrestling industry. The systems they have created, strategic partnerships they have made, and direction new management has taken the company are creating a vacuum for talent in competing businesses.

I try not to use the word monopoly lightly. I reserve it for very special circumstances, such as when I wrote about ASML Holding N.V. ( ASML ) and their monopoly on EUV lithography back in May. They are the only ones doing what they are doing....

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