TKO thesis for Endeavor ‘largely intact,’ says BofA

BofA notes that shares of TKO Group (TKO), the combination of recently merged WWE and UFC that is 51% owned by Endeavor Group (EDR), are down 30% from their late August peak due to a combination of two events – namely the Saudi Arabian investment in PFL that raises competitive risks and the NBCU (CMCSA) media rights deal for Smackdown that came at a lower increase than expected along with NBC trading down from Raw’s three hours of programming to Smackdown’s two hours. However, the firm continues to believe WWE will be able to command a 1.4-1.5 times increase in AAV across both Raw and Smackdown and believes the long term TKO thesis “remains intact.” The firm, which continues to view Endeavor as “a collection of highly compelling assets” that each, individually, have exposure to favorable secular tailwinds, maintains a Buy rating and $32 price target on Endeavor shares.