Citi started coverage of World Wrestling Entertainment (WWE) today with a Buy rating and a $25 price target. The firm is upbeat on the company's shift to a subscription business model, which it notes may make the sports entertainment company a more attractive target for a big-name media buyer seeking content.

BUSINESS MODEL: WWE's decision to switch to a Web-based subscription model from a pay-per view model three years ago was "smart," wrote Citi analyst Jason Bazinet. By making the change, the company cut its ties with the weakening pay TV ecosystem and left itself better positioned to grow through 2020, the analyst stated. Moreover, the change made the company more attractive to potential acquirers, such as 21st Century Fox (FOXA), Comcast (CMCSA) and Liberty Media's Formula One (FWONA), Bazinet believes.

FINANCIAL OUTLOOK: As of last quarter, WWE had 1.4M paying subscribers, running significantly below the 1.72M addressable market, Bazinet reported. The analyst thinks that the company has room to grow, and estimates that its earnings before interest and taxes will reach the breakeven rate when it obtains 1.51M total subscribers. Between 2016 and 2020, WWE's revenue will increase 6% per year and its free cash flow will jump about 40% annually, predicted Bazinet.

WHAT'S NOTABLE: WWE's WrestleMainia event will be available live in China for the first time on April 3, WWE announced today. The event will be shown live on Chinese streaming service PPTV.

PRICE ACTION: In early trading, WWE rose 1% to $22.20 per share.