TD Cowen lifts TKO Group stock target to $200, keeps Buy rating

On Monday, TD Cowen reaffirmed its positive stance on TKO Group Holdings (NYSE:TKO), raising the price target to $200 from the previous $145 while maintaining a Buy rating on the company’s shares. The adjustment follows the release of TKO Group’s fourth-quarter results for the fiscal year 2024. Currently trading at $151.63, InvestingPro analysis suggests TKO is trading below its Fair Value, with the company showing impressive revenue growth of 67.43% over the last twelve months.

Despite the company reporting favorable earnings for the quarter, TKO Group’s stock experienced a decline due to a weaker-than-expected forecast for fiscal year 2025. The downward movement was attributed primarily to an unexpected delay in overseas Project Lifecycle Events (PLEs). Analysts at TD Cowen, however, consider this concern to be of little consequence in the long term. They highlight the robust underlying trends across all of TKO Group’s properties, which they believe will support the stock’s performance moving forward. This view is supported by InvestingPro data, which shows TKO has delivered an impressive 83.02% return over the past year and maintains a healthy financial position with a current ratio of 1.3.

In addition to the strong trends, TD Cowen pointed to the ongoing renewal of media rights for the Ultimate Fighting Championship (UFC) as a positive factor. The firm also anticipates benefits from the integration of recent acquisitions, including IMG, On Location, and Professional Bull Riders (PBR), which are expected to contribute to the company’s growth.

The new price target of $200 is based on a 20-times multiple of the firm’s revised, higher forecast for TKO Group’s adjusted EBITDA for fiscal year 2026. This revision suggests confidence in the company’s ability to expand its earnings before interest, taxes, depreciation, and amortization in the coming years. With a market capitalization of $25.97 billion and a GOOD overall financial health score according to InvestingPro, which offers comprehensive analysis and 12 additional ProTips for this stock in its detailed Research Report, TKO appears well-positioned for future growth.

TD Cowen’s analysis reflects a focus on the long-term prospects for TKO Group, emphasizing the anticipated positive impact of strategic initiatives and acquisitions on the company’s financial health and market standing.

In other recent news, TKO Group Holdings reported robust fourth-quarter earnings for 2024, surpassing analysts’ expectations with an earnings per share (EPS) of $0.28, well above the forecasted $0.17. The company also reported revenue of $642.2 million, exceeding the anticipated $603.41 million. Guggenheim analysts responded to these results by raising the price target for TKO Group to $175, maintaining a Buy rating, and noting the integration synergies between WWE and UFC as a positive factor. However, Benchmark analysts maintained a Hold rating on TKO Group, citing concerns about rising costs and uncertainties surrounding UFC media rights renewals.

The company has set ambitious guidance for 2025, with projected revenues between $2.93 billion and $3.00 billion and adjusted EBITDA expected to be in the range of $1.35 billion to $1.39 billion. This outlook includes a notable shift of a WWE Saudi event from 2025 to 2026, affecting revenue and EBITDA projections. Guggenheim analysts suggest that TKO’s guidance may be conservative, particularly in areas such as expenses and sponsorships.

Additionally, TKO Group has been involved in strategic moves, such as transitioning WWE Raw to Netflix (NASDAQ:NFLX) and SmackDown to USA Network, contributing to its financial performance. The company achieved over $100 million in net savings from the integration of UFC and WWE, with expense synergies exceeding $100 million and significant revenue synergies believed to surpass $250 million. Despite these positive developments, some analysts express concerns over TKO’s recent acquisition, suggesting it may primarily benefit management while introducing integration costs and strategic uncertainty for shareholders.

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