On Thursday, Guggenheim maintained a Buy rating on TKO Group Holdings (NYSE:TKO) and increased its price target to $170.00 from the previous $142.00. According to InvestingPro data, TKO currently trades near its 52-week high of $149.40, with analysts maintaining a strong buy consensus. The firm’s analyst, Curry Baker, cited an updated model that boosts the forecast for the company’s adjusted EBITDA in 2025 and 2026. The new projections are $1.50 billion and $1.89 billion, respectively, which are above the consensus excluding EDR assets.
Baker’s analysis points to strong performance and positive trends in TKO Group’s variable business segment. With a robust gross profit margin of 68% and revenue growth exceeding 108% in the last twelve months, the company shows strong operational efficiency. The raised outlook is partly due to higher renewal expectations for the UFC and WWE Pay-Per-View (PLE) deals with Peacock. The UFC rights are now anticipated to renew at 2.0 times the previous rate, up from 1.8, while the WWE PLE deal is expected to renew at 1.9 times, up from 1.7.
The report also highlights the robust sports rights market, with multiple parties showing interest in UFC rights beyond the current broadcaster, Disney (NYSE:DIS). Furthermore, the analyst believes the previous WWE PLE deal with Peacock was undervalued, and the upcoming renewal will likely include a pay-per-view component that justifies a significant price increase.
In addition to the contract renewals, TKO Group’s integration of WWE and UFC is progressing well, with expense synergies exceeding $100 million and significant revenue synergies projected to be over $250 million. Baker suggests that these factors contribute to a conservative estimate, indicating the potential for even stronger financial outcomes for TKO Group. The revised price target reflects this optimistic outlook for the company’s future performance. InvestingPro analysis reveals 12 additional investment tips and comprehensive financial metrics that could help investors make more informed decisions about TKO’s growth trajectory.
In other recent news, former WWE CEO Vince McMahon has settled undisclosed agreement charges with the SEC, which resulted in WWE overstating its 2018 and 2021 net income by approximately 8 percent and 1.7 percent respectively. McMahon has agreed to pay a $400,000 civil penalty and reimburse WWE $1,330,915.90.
In the realm of financial analysis, Citi has maintained its Buy rating on TKO Group Holdings, increasing the stock’s price target from $137.00 to $170.00. This adjustment is based on a steady outlook for WWE and an updated forecast for the Ultimate Fighting Championship (UFC) rights.
TKO Group Holdings has also secured a $2.25 billion loan facility and made strides in its financial initiatives with a $2.75 billion term loan. These developments follow TKO’s acquisition of Professional Bull Riders, On Location, and IMG from Endeavor in an all-equity deal valued at $3.25 billion.
Additionally, TKO Group Holdings is advancing its acquisition of several Endeavor Group Holdings businesses, including Professional Bull Riders, On Location, and IMG. The company has also provided additional financial details on this proposed acquisition in a recent SEC filing.
Lastly, BofA Securities has increased the price target for TKO Group Holdings to $165 from $140, reaffirming a Buy rating on the company’s shares. This adjustment reflects a positive outlook on the company’s performance and its strategic position within the sports media landscape.
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