Price Target Raised on Rising UFC Revenue By Investing.com

TKO Group Holdings (NYSE:TKO) received a vote of confidence from Guggenheim as the investment firm reiterated its Buy rating on the company’s stock and raised its price target to $140 from $135. This adjustment is based on several performance factors, including a significant increase in UFC sponsorship revenue, solid results in WWE live events and effective cost management, resulting in significant synergistic benefits.

The Guggenheim analyst highlighted that TKO Group’s recent UFC 306 event contributed an estimated $35 million to $40 million in revenue, with more than $20 million coming from Riyadh Season as title sponsor. The company continued to see success in its WWE live events business, where it has become more aggressive in managing ticket sales this year to maximize revenue.

TKO Group continues to enjoy cost savings from synergies in excess of $100 million per year. The company’s third-quarter revenue and calculated EBITDA forecasts were revised upward to $683 million (previously $764 million) and $313 million (previously $304 million), respectively. These numbers beat consensus estimates of $662 million in revenue and $292 million in breakeven EBITDA.

For the full year, Guggenheim expects adjusted EBITDA of $1,260 billion for TKO Group, above the company’s own guidance of $1,220 billion to $1,240 billion. The firm’s positive outlook on TKO Group remains unchanged, driven by robust execution of cost and revenue synergies as well as the potential for favorable outcomes from upcoming media rights extensions.

The analyst forecasts significant growth rates for UFC and Peacock media rights, modeling them at 1.8x and 1.7x, respectively.

The price target increase to $140 reflects the higher EBITDA guidance and underscores the firm’s confidence in TKO Group’s financial performance and strategic initiatives.

TKO Group Holdings settled an antitrust lawsuit for $375 million. The lawsuit, filed by former UFC athletes, accused TKO Operating Company and its subsidiaries of anti-competitive practices. The settlement amount, which is to be paid in installments, is expected to be tax deductible.

In addition, the TKO Group is the focus of several significant developments. Both Pivotal Research and Citi monitored the company and gave it a buy rating. Pivotal Research highlighted the potential for strong revenue growth at TKO, particularly as a result of the recent merger between Ultimate Fighting Championships (UFC) and Worldwide Wrestling Entertainment (WWE). BofA Securities renewed a Buy rating and set a new price target of $140.00, highlighting the company’s strength in sports rights.

InvestingPro Insights

TKO Group Holdings’ recent performance aligns with several InvestingPro picks and metrics and provides additional context to Guggenheim’s bullish outlook. InvestingPro Tips suggests that net profit and revenue are expected to grow this year, supporting the analyst’s positive revenue and EBITDA forecasts. The company’s strong return over the past three months with a total return of 15.75% and trading near its 52-week high (99.61% of high) reflects the market’s confidence in TKO’s performance.

Last twelve month revenue growth of 107.77% and significant quarterly growth of 178.9% underscore TKO’s robust business expansion, particularly in areas such as UFC sponsorships and WWE live events, as noted in the article. With a gross margin of 68.42%, TKO demonstrates strong profitability in its core businesses.

While the company currently operates on a negative price-to-earnings (P/E) ratio, analysts are forecasting profitability this year, which is in line with Guggenheim’s positive EBITDA forecasts. Investors should note that TKO trades at high valuation multiples, which may be justified by its growth prospects and potential synergy benefits.

For readers seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for TKO that provide a deeper understanding of the company’s financial position and market performance.

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