TKO Group, the sports and entertainment company that comprises WWE and UFC, presents a striking financial profile with growth potential, analysts at the Bank of America believe.
The bank's analysts have initiated coverage on the company with a ‘Buy’ rating and a $100 price target, implying a 25% upside to TKO's share price of $80 on Friday morning.
“TKO, formed in September 2023, represents a combination of two iconic brands, wrestling juggernaut WWE and mixed martial arts league UFC, with significant synergies and growth potential,” the analysts wrote in a note to clients.
“We would not be surprised if there are substantial revenue synergies in addition to the $50 million to $100 million in cost savings initially targeted at the deal announcement.”
In terms of the company’s growth potential, the analysts project a 13% revenue compound annual growth rate (CAGR), 20% earnings before interest, taxes, depreciation and amortization (EBITDA) CAGR, and 34% free cash flow CAGR, which they believe offers an attractive combination of top line growth, margin expansion and free cash flow generation.
In the immediate term, they view the remaining US media rights for the UFC as the most important catalyst for the stock.
“We believe UFC's US rights remain the crown jewel within the TKO's media rights portfolio and will command significant increases upon renewal in 2026,” they wrote. “Assuming the UFC commands a 1.7x average annual value increase, it will drive an incremental about $143 million in revenue in 2026.”
They also see areas of revenue opportunity in sponsorship, international media rights and expansion, ticketing and dynamic pricing, site fees, and better monetization of WWE’s social media engagement.
The bank’s analysts added that they see a scarcity value for premium companies within the evolving media industry.
“Our valuation reflects a unique opportunity to own a quasi-sports league with attractive year-round programming and substantial growth,” they wrote.
However, they noted two main risks to the stock, being lower than expected media rights and challenges in realizing synergies opportunities.