WWE shares hit 52-week high

New deal with Mattel expected to drive further gains

NEW YORK -- Ahead of the company's annual pay per view spectacular WrestleMania at the end of the month, World Wrestling Entertainment shares recently hit a new 52-week high of $18.11, begging the question of where they will go next.

Some on Wall Street have pointed out that a recent runup has left them at a premium to entertainment giants and argued that there is no immediate catalyst to drive them higher

But others say a three-year business plan unveiled late last year that calls for 15%-20% earnings growth and excitement about the upcoming annual extravaganza have encouraged investors, as has the lack of major competitive pressure -- at least so far -- from smaller wrestling rival TNA, which recently teamed with ring legend Hulk Hogan, and mixed martial arts outfit UFC.

"We continue to view WWE shares favorably due to steady cash flows and dividends, an expected surge in consumer products revenue and a near-term catalyst in WrestleMania XXVI," said Roth Capital's Richard Ingrassia in mid-February in maintaining his "buy" rating. However, the stock has since inched closer to the analyst's $18 price target.

Wedbush Securities analyst Chris White upgraded the stock from "neutral" to "outperform" in late January and boosted his price target by $5 to $19 before another upgrade from a fellow analyst. "We have a high degree of confidence the company can grow earnings 15%-20% through 2012," even though some investors have had their doubts, White argued.

He later also called WWE's new toy licensing deal with Mattel, rather than former partner Jakks Pacific, a game-changer that is still under-appreciated by the Street. "We expect Mattel's much larger distribution network and international presence to drive meaningful upside for WWE over the next few years," White said.

But Arvind Bhatia, analyst Sterne, Agee & Leach, is less convinced that there is more upside in WWE's stock. He rates it at "neutral."

"We continue to be impressed with management's ability to manage expenses, but feel that overall headwinds still exist for the company -- demonstrated by weak domestic attendance/ticket pricing and weakness in consumer products (driven by home video and licensing revenue)," he said.

WWE shares on Wednesday closed at $17.12, giving the company a market capitalization of $1.26 billion. Over the past year, the stock has traded as low as $10.34. Its one-year return stands at 71%, according to Bloomberg.