TKO Group’s NFLX deal is the shot in the arm investors need

photo of a cell phone with the Neftflix logo and RAW logo in the background

Key points

  • TKO Group has announced that Netflix will be the new home of the popular weekly program WWE Raw starting in January 2025.
  • The combined marketing resources of UFC and WWE should make TKO a valuable partner for existing and new customers.
  • TKO will release its fourth quarter and 2023 financials on February 27.
  • 5 stocks we like best from TKO Group

At the time of Dwayne “The Rock” Johnson’s appointment to the board of directors he was the the second best what happened, you know it’s been a good week for TKO Group Holdings, Inc. NYSE: TKO.

On Tuesday, the parent company of mixed martial arts leader UFC and wrestling team WWE announced this Netflix Inc. NASDAQ: NFLX will be the new home of the weekly WWE Raw program starting in January 2025. The long-term deal will see WWE’s flagship wrestling show move to streaming TV after airing on traditional cable for 31 years. Fittingly, the iconic show Raw helped launch Dwayne Johnson’s career in 1996, when he went by the alias Rocky Maivia.

The powerful one-two punch of news helped TKO hit a nearly 16% gap in record volume. The resulting low-volume retreat created a favorable entry point for an emerging media industry player. Formerly World Wrestling Entertainment, Inc., the premium sports and entertainment entity began trading under the symbol TKO in September 2023 through a deal with majority owner Endeavor Group Holdings.

WWE’s decision to exit the linear programming arena was long overdue, considering the consumer cord-cutting trend has been active for over a decade. Teaming up with Netflix, however, is a heavy-handed move that more than makes up for the organization’s reluctance to step outside the cable TV ring. Netflix remains the most popular streaming service in the world, with 260 million paying subscribers. Inc NASDAQ:AMZN Amazon Prime Video e THE of the Walt Disney company NYSE: DIS Disney+ has filled the gap but doesn’t have the same global reach as Netflix.

For WWE, the Netflix tie-in is especially valuable because it includes the United States, Canada, the United Kingdom and Latin America, which account for the majority of Netflix subscriptions. Plans to expand into other countries and regions over time point to a long-lasting partnership that is likely to result in significant revenue growth for TKO Group. Given the widespread popularity of WWE’s Raw, SmackDown and NXT content (all part of the deal), Netflix could also get a significant subscriber boost.

Raw alone has over a billion social media followers. It is currently the highest-rated show on USA Network, where it attracts 17.5 million viewers annually and is especially popular among 18- to 49-year-olds. The move of the show to Netflix is ​​a hard blow Comcast Co. NASDAQ: CMCSA NBCUniversal, which owns USA Network, but it was a unanimous win for TKO Group.

What is TKO’s marketing strategy?

Together, TKO Group’s UFC and WWE assets reach more than one billion households worldwide. They organize more than 350 live events throughout the year which attract an additional million fans. The ongoing integration between UFC and WWE took another step forward earlier this month.

On January 4, TKO Group combined the global partnership teams of its two crown jewels into a single sports marketing unit. The move is designed to make TKO more attractive to advertisers and brand partners through increased content and scale. Over the years UFC has partnered with several major consumer-facing companies, including Anheuser-Busch InBev NYSE: BUD, Monster Energy Corporation NASDAQ: MNST and Jose Cuervo. WWE boasts its own range of high profile brands which includes PepsiCo Inc. NASDAQ:PEPPizza Hut, Mattel Inc. NASDAQ: MAT and Applebee’s.

The combined marketing resources of UFC and WWE should make TKO a valuable partner for existing and new customers. As of January 1 of this year, AB-InBev became the “Official Global Beer Partner of the UFC,” and Bud Light became the Official Beer of the UFC. Bud Light’s renewed UFC sponsorship comes after a tumultuous 2023, when the nation’s leading beer brand faced a boycott for sponsoring transgender TikTok personality Dylan Mulvaney.

When does TKO report fourth quarter financials?

On Friday, TKO Group announced that it will report fourth-quarter and 2023 financials after the close on Feb. 27. Management will host a conference call at 5:00 PM EST to discuss the results and provide a business update.

On November 8, 2023, TKO stock reached $87.67 after the company released its third quarter numbers. Revenues increased 32% year-over-year to $449.1 million, with UFC accounting for nearly 90% of total revenues. WWE’s new Netflix deal should make it a bigger revenue contributor in 2024 and beyond, giving TKO two strong entertainment businesses.

After reaching $95.92 on Tuesday, TKO ended the week at $86.54. The stock received bullish comments from four different Wall Street analysts last week, all of whom gave it a buy rating. Citi added TKO to its North America Focus List with a high price target of $125.00, implying an upside of 44%. This is something growth investors have to grapple with.

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