King of the ring World Wrestling Entertainment (WWE: sentiment, chart, options) is poised to battle the earnings gods before the market opens tomorrow. (Thomson Financial reports that the company is expected to record second-quarter earnings of 12 cents per share.) However, heading into the report, there is one group challenging WWE's strength: short sellers.
Before we delve into the short-selling arena, let's take a look at how WWE is faring on the charts. From an historical standpoint, the shares of WWE have marked a series of higher highs and higher lows since early 2003. However, more recently, the stock has been somewhat subdued, consolidating between support in the 13-to-14 region and resistance in the 18-to-20 neighborhood since early 2006. Year-to-date, the equity has tacked on roughly 12%, and is currently hovering in the $16.60 area. Compared to the broad market, WWE is the champ, with the shares outperforming the S&P 500 Index (SPX) by 14% during the past 60 trading days.
However, these skeptics could prove to be a boon for WWE, should the stock win the earnings war tomorrow. A stronger-than-expected earnings report could spook the shorts; at the stock's average daily trading volume, it would take nearly 10 days for these bears to buy back their pessimistic positions. A short-covering rally of this magnitude could act as a potential catalyst higher.
On the flip side, should WWE be defeated in the earnings confessional, the security could face the wrath of analysts. Heading into the report, Zacks reports that 4 out of 6 ranking brokers harbor "buy" or better ratings on the equity. A disappointing earnings report could motivate these bullish brokers to issue downgrades, which could place additional selling pressure on the shares.
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