On Thursday, Wolfe Research adjusted its share price target for TKO Group Holdings (NYSE:TKO), bringing it down to $106 from the previous $107, while maintaining an Outperform rating.
The adjustment comes in the wake of TKO Group resolving a class-action lawsuit involving UFC, which the research firm believes will refocus investor attention on the company's fundamental growth drivers.
The research firm anticipates that investor optimism will grow regarding TKO's future sales of WWE streaming rights, currently with Peacock, and UFC rights with ESPN. The recent $5 billion deal with Netflix (NASDAQ:NFLX) for WWE content is expected to be a significant factor in this renewed investor confidence. Additionally, the stock's performance is likely to be influenced by the ongoing strategic review by Endeavor, although the timeline for this review remains unspecified.
TKO Group's progress on renewing streaming rights for UFC on ESPN+ and WWE on Peacock will be closely monitored, as will any potential stock sales by Vince McMahon. Looking further ahead, Wolfe Research expects the combined UFC and WWE brands to sustain strong, profitable, and cash-generative revenue growth. This optimism is based on the company's ability to leverage its brands globally through media rights sales, live event production, sponsorships, and consumer product sales.
The research firm also noted that historically, investors have shown a lack of confidence in Up-C structures, which is expected to result in a discounted price to free cash flow (P/FCF) multiple compared to peers. Wolfe Research has deducted $103 million in equity value, equivalent to $1 per Class A share, due to the UFC class-action settlement.
This deduction was factored into the revised 17x P/FCF multiple on the 2026 free cash flow per Class A share, excluding the UFC settlement payment, and discounted back to the end of 2024. The firm emphasized that this multiple represents a discount to the S&P average, industry peers, and WWE's historical multiples, while reiterating the Outperform rating and the new $106 price target.
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