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Hasbro Stock Up 35% in 6 Months: Should You Buy, Hold or Wait?
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Shares of Hasbro, Inc. (HAS - Free Report) have increased 35.3% in the past six months compared with the industry’s 15.4% rise. The stock has also performed better than the broader Consumer Discretionary sectors’s drop of 1.4% and the S&P 500’s 10.6% increase in the same time frame.
The American multinational toy manufacturing and entertainment holding company is riding high on the strategic blend of operational improvements and a robust business mix. HAS has seen significant expansion in its operating margins thanks to strong growth in consumer product licensing, enhanced MAGIC performance and more efficient supply chain management. The company’s strategic focus on launching new products, content and partnerships is also paying off.
Image Source: Zacks Investment Research
Technical indicators are supportive of Hasbro's strong performance. The stock is currently trading at $68.2 on Aug. 30, above its 50-day moving average of $61.8 and the 200-day moving average of $54.7. This technical strength reflects positive market perception and confidence in HAS' financial health and prospects. So, should investors pour more capital into HAS’ shares now? Let’s take a closer look.
Image Source: Zacks Investment Research
Key Fundamentals Supporting HAS' Stock Growth
Strong Performance in Gaming and Digital Licensing: Hasbro's gaming division, particularly through its Wizards of the Coast segment, has been a significant contributor to the company's success. The company’s second-quarter performance highlighted notable strength in digital licensing. HAS’ partnership with Scopely for the game Monopoly Go! has been a standout, generating more than $3 billion in revenues since launch. This success has bolstered Hasbro's top line and also positioned it as the leading licenser of video games in the past year.
The company's investment in digital platforms has paid off handsomely. As the toy and game industry increasingly integrates with digital experiences, Hasbro's early investments in its own studio capacity and digital partnerships have given it a competitive edge.
Innovation and Expansion in Consumer Products: Hasbro's commitment to innovation is evident in its consumer products segment. The company successfully maintained healthy inventory levels and improved operating margins despite the challenging macroeconomic environment. HAS’ MAGIC: THE GATHERING continued to thrive, with its recent set release, Modern Horizons 3, becoming the fastest-selling set in the brand's history. Although the second half of the year might present tougher comparisons, Hasbro's pipeline of releases, including upcoming Universes Beyond sets for Final Fantasy and Marvel, is expected to drive growth into 2025.
In the toys segment, its focus on revitalizing core properties is starting to bear fruit. The global rollout of Beyblade following a successful launch in Japan, coupled with strong demand for the Nerf product line, demonstrates the company’s ability to innovate and capture consumer interest. Partnerships such as the Transformers Overwatch 2 Crossover and new arcade-style games for Power Rangers are further enhancing its brand presence.
Operational Excellence and Financial Discipline: Hasbro's operational discipline has been a key driver of its improved profitability. The company's focus on cost savings, supply chain productivity and process enhancements resulted in significant operating margin expansion. In the first half of 2024, Hasbro delivered an impressive adjusted operating margin of 22.7%, up more than 14 points year over year. This underscores the company's ability to navigate challenges while maintaining financial stability.
Hasbro's prudent financial management is reflected in its ability to return capital to shareholders. The company returned $97 million through dividends in the recent quarter and ended the period with a strong cash position of $1.1 billion. This financial strength provides Hasbro with the flexibility to continue investing in growth initiatives while rewarding shareholders.
Factors That May Hinder HAS’ Stock Price Growth
Sluggish Revenue Growth and Decline in Core Segments: Despite a seemingly solid quarter, Hasbro's overall financial performance paints a less rosy picture. The company posted total net revenues of $995 million in the fiscal second quarter fell 18% from the year-ago period’s tally. Even when excluding the impact of the sale of its eOne film and TV business, revenues were still down 6%. The downside was mainly caused by a 20% decline in the Consumer Products segment, a core component of Hasbro's business. The Entertainment segment also saw a dramatic 90% decline, further eroding the company's top line.
Over-Reliance on Digital and Gaming Segments: Hasbro’s emphasis on its digital gaming and licensing business, while strategically sound, indicates a concerning over-reliance on these sectors to drive growth. The success of digital titles like Monopoly Go! and Baldur's Gate 3 contributed positively to the company’s results, but these gains might not be sustainable. The company’s guidance suggests that digital licensing revenues could decelerate in the coming quarters, particularly as it laps previous strong releases. This reliance on a few digital products adds a layer of risk, especially if these products fail to maintain their current momentum.
Uncertainty in Turnaround Efforts for Core Toys Business: Hasbro's core toys and consumer products division continues to face headwinds. The segment’s revenue fell by 20% in the fiscal second quarter, impacted by lower closeout volumes and reduced entertainment slates. Although the management has initiated strategic efforts to counter the same, the company has yet to demonstrate success in revitalizing this crucial part of its business. The challenges are compounded by a rapidly changing retail environment and evolving consumer preferences, which add uncertainty to Hasbro's outlook.
Competitive Pressures and Market Shifts: The toy and game industry is highly competitive, with Hasbro facing stiff competition from traditional rivals and newer digital-native entrants, including Mattel, Inc. (MAT - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) . Hasbro invested heavily in expanding its digital gaming capabilities, but this move might come too late to capture the shifting market fully. While the company has a head start in some areas, other players in the market are quickly catching up, threatening Hasbro’s first-mover advantages.
Valuation & Rising Estimates
Hasbro is trading at a discount to the industry. With a forward 12-month price-to-earnings of 16.04X, which is well below the industry average of 25.62X, the stock presents a potentially attractive valuation for investors.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) increased from $3.72 to $3.93 in the past 60 days. During the same period, the consensus mark for 2025 EPS moved up from $4.29 to $4.41.
Image Source: Zacks Investment Research
Investment Verdict: Buy, Hold, or Wait?
Hasbro's stock has undoubtedly caught the attention of investors. The company’s strong performance in gaming and digital licensing, coupled with innovation in consumer products and operational excellence, provides a solid foundation for future growth. However, concerns related to sluggish revenue growth in core segments, over-reliance on digital success, and competitive pressures cannot be ignored.
For investors, Hasbro's attractive valuation and rising earnings estimates make it a compelling hold, especially for those who already own the stock. For new investors, while the stock's recent surge suggests strong momentum, it's crucial to gauge potential risks against growth drivers before making a buying decision.
Image: Bigstock
Hasbro Stock Up 35% in 6 Months: Should You Buy, Hold or Wait?
Shares of Hasbro, Inc. (HAS - Free Report) have increased 35.3% in the past six months compared with the industry’s 15.4% rise. The stock has also performed better than the broader Consumer Discretionary sectors’s drop of 1.4% and the S&P 500’s 10.6% increase in the same time frame.
The American multinational toy manufacturing and entertainment holding company is riding high on the strategic blend of operational improvements and a robust business mix. HAS has seen significant expansion in its operating margins thanks to strong growth in consumer product licensing, enhanced MAGIC performance and more efficient supply chain management. The company’s strategic focus on launching new products, content and partnerships is also paying off.
Image Source: Zacks Investment Research
Technical indicators are supportive of Hasbro's strong performance. The stock is currently trading at $68.2 on Aug. 30, above its 50-day moving average of $61.8 and the 200-day moving average of $54.7. This technical strength reflects positive market perception and confidence in HAS' financial health and prospects. So, should investors pour more capital into HAS’ shares now? Let’s take a closer look.
Image Source: Zacks Investment Research
Key Fundamentals Supporting HAS' Stock Growth
Strong Performance in Gaming and Digital Licensing: Hasbro's gaming division, particularly through its Wizards of the Coast segment, has been a significant contributor to the company's success. The company’s second-quarter performance highlighted notable strength in digital licensing. HAS’ partnership with Scopely for the game Monopoly Go! has been a standout, generating more than $3 billion in revenues since launch. This success has bolstered Hasbro's top line and also positioned it as the leading licenser of video games in the past year.
The company's investment in digital platforms has paid off handsomely. As the toy and game industry increasingly integrates with digital experiences, Hasbro's early investments in its own studio capacity and digital partnerships have given it a competitive edge.
Innovation and Expansion in Consumer Products: Hasbro's commitment to innovation is evident in its consumer products segment. The company successfully maintained healthy inventory levels and improved operating margins despite the challenging macroeconomic environment. HAS’ MAGIC: THE GATHERING continued to thrive, with its recent set release, Modern Horizons 3, becoming the fastest-selling set in the brand's history. Although the second half of the year might present tougher comparisons, Hasbro's pipeline of releases, including upcoming Universes Beyond sets for Final Fantasy and Marvel, is expected to drive growth into 2025.
In the toys segment, its focus on revitalizing core properties is starting to bear fruit. The global rollout of Beyblade following a successful launch in Japan, coupled with strong demand for the Nerf product line, demonstrates the company’s ability to innovate and capture consumer interest. Partnerships such as the Transformers Overwatch 2 Crossover and new arcade-style games for Power Rangers are further enhancing its brand presence.
Operational Excellence and Financial Discipline: Hasbro's operational discipline has been a key driver of its improved profitability. The company's focus on cost savings, supply chain productivity and process enhancements resulted in significant operating margin expansion. In the first half of 2024, Hasbro delivered an impressive adjusted operating margin of 22.7%, up more than 14 points year over year. This underscores the company's ability to navigate challenges while maintaining financial stability.
Hasbro's prudent financial management is reflected in its ability to return capital to shareholders. The company returned $97 million through dividends in the recent quarter and ended the period with a strong cash position of $1.1 billion. This financial strength provides Hasbro with the flexibility to continue investing in growth initiatives while rewarding shareholders.
Factors That May Hinder HAS’ Stock Price Growth
Sluggish Revenue Growth and Decline in Core Segments: Despite a seemingly solid quarter, Hasbro's overall financial performance paints a less rosy picture. The company posted total net revenues of $995 million in the fiscal second quarter fell 18% from the year-ago period’s tally. Even when excluding the impact of the sale of its eOne film and TV business, revenues were still down 6%. The downside was mainly caused by a 20% decline in the Consumer Products segment, a core component of Hasbro's business. The Entertainment segment also saw a dramatic 90% decline, further eroding the company's top line.
Over-Reliance on Digital and Gaming Segments: Hasbro’s emphasis on its digital gaming and licensing business, while strategically sound, indicates a concerning over-reliance on these sectors to drive growth. The success of digital titles like Monopoly Go! and Baldur's Gate 3 contributed positively to the company’s results, but these gains might not be sustainable. The company’s guidance suggests that digital licensing revenues could decelerate in the coming quarters, particularly as it laps previous strong releases. This reliance on a few digital products adds a layer of risk, especially if these products fail to maintain their current momentum.
Uncertainty in Turnaround Efforts for Core Toys Business: Hasbro's core toys and consumer products division continues to face headwinds. The segment’s revenue fell by 20% in the fiscal second quarter, impacted by lower closeout volumes and reduced entertainment slates. Although the management has initiated strategic efforts to counter the same, the company has yet to demonstrate success in revitalizing this crucial part of its business. The challenges are compounded by a rapidly changing retail environment and evolving consumer preferences, which add uncertainty to Hasbro's outlook.
Competitive Pressures and Market Shifts: The toy and game industry is highly competitive, with Hasbro facing stiff competition from traditional rivals and newer digital-native entrants, including Mattel, Inc. (MAT - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) . Hasbro invested heavily in expanding its digital gaming capabilities, but this move might come too late to capture the shifting market fully. While the company has a head start in some areas, other players in the market are quickly catching up, threatening Hasbro’s first-mover advantages.
Valuation & Rising Estimates
Hasbro is trading at a discount to the industry. With a forward 12-month price-to-earnings of 16.04X, which is well below the industry average of 25.62X, the stock presents a potentially attractive valuation for investors.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) increased from $3.72 to $3.93 in the past 60 days. During the same period, the consensus mark for 2025 EPS moved up from $4.29 to $4.41.
Image Source: Zacks Investment Research
Investment Verdict: Buy, Hold, or Wait?
Hasbro's stock has undoubtedly caught the attention of investors. The company’s strong performance in gaming and digital licensing, coupled with innovation in consumer products and operational excellence, provides a solid foundation for future growth. However, concerns related to sluggish revenue growth in core segments, over-reliance on digital success, and competitive pressures cannot be ignored.
For investors, Hasbro's attractive valuation and rising earnings estimates make it a compelling hold, especially for those who already own the stock. For new investors, while the stock's recent surge suggests strong momentum, it's crucial to gauge potential risks against growth drivers before making a buying decision.
HAS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.