WWE - WWE investors too optimistic after solid quarter - Wells Fargo

World Wrestling Entertainment ( NYSE: WWE ) pulled off a modest gain Tuesday following Q2 earnings where it beat expectations and raised its outlook, buts Wells Fargo thinks expectations for the company are running a bit hot.

WWE "hit all the right buttons" on a call with new co-CEOs Stephanie McMahon and Nick Khan, Wells Fargo analyst Steven Cahall said, adding that content is delivering under Paul Levesque; Peacock ( CMCSA ) is driving record viewership; and linear TV is stabilizing on USA Network and Fox.

But the "construct setting up for the next renewal cycle has become overly bullish," he said, pointing to lingering long-term risks.

The next round comes down to number of bidders, he said - and he doesn't think Fox ( FOX ) ( FOXA ) is interested in paying a step-up for SmackDown, and Comcast ( CMCSA ) already makes up 32% of WWE's revenues, giving them leverage. From a digital perspective, Cahall thinks Apple, Netflix and Amazon might be bidders for exclusive digital rights, but even those appetites likely have limitations (Comcast may be the only bidder looking for linear and digital rights).

He's moved estimates for 2022 adjusted operating income (before depreciation and amortization) to $384M, and 2023 to $409M, and bumps EPS to $2.54 and $2.65 for 2022 and 2023 respectively - but he's Underweight and thinks the stock is "tough to love" over $70 per share, where it's sitting now (at $72.15, down 1.7% on the day).

A "more reasonable" target multiple leads to a $50 price target, implying 31% downside.

For more on earnings, dig into Seeking Alpha's transcript of WWE's earnings call .

For further details see: