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JAKK Stock's Earnings Estimates Going Down: Hold or Fold?
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The Zacks Consensus Estimate for JAKKS Pacific, Inc.’s (JAKK - Free Report) 2024 and 2025 earnings per share (EPS) has dropped by 14.3% and 10.3%, respectively, in the past 60 days. The downward revision in earnings estimates indicates analysts’ decreasing confidence in the stock.
The toy and consumer products company also missed the Zacks Earnings Estimates in the trailing three quarters.
Shares of JAKKS Pacific have declined 28.8% so far this year against the Zacks Toys - Games – Hobbies industry's 5.4% gain. The company’s share price performance also lagged industry players like Hasbro, Inc. (HAS - Free Report) , Mattel, Inc. (MAT - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) .
JAKK’s Price Performance
Image Source: Zacks Investment Research
Factors Acting as Headwinds for JAKK Stock
The company’s performance is negatively impacted by macroeconomic pressures and inconsistent demand, particularly in international markets. In the second quarter of 2024, net sales amounted to $148.6 million, reflecting an 11% decline compared to the previous year. The decline was largely attributed to year-over-year soft sales in the Toys/Consumer Products segment due to lower sales in North America and softer Disney sales, accompanied by a fall in Costumes sales due to reduced orders from select recurring costumes. For the quarter, Toys/Consumer Products segment sales were down 11.3% globally, and sales of Costumes were down 10.1% year over year. The downtrend was backed by a lack of new film releases.
While JAKKS Pacific has a strong slate of product launches planned for the second half of 2024, including toys linked to major movie franchises like Disney’s Moana 2 and Sega’s Sonic the Hedgehog 3, it’s unclear whether the new releases will be enough to reverse the current downward trend in sales.
One of the key weaknesses in JAKKS Pacific's recent performance is its international segment. During the second quarter, International sales dropped 31.1% year over year to $16.5 million. The company cited logistics issues in Asia and a content-light first half as reasons for the downturn. These factors, combined with macroeconomic headwinds and inconsistent consumer demand in key international markets, have significantly weighed on JAKKS’ ability to grow outside of North America.
JAKKS Pacific has been increasing its spending on infrastructure and SG&A (Selling, General, and Administrative) expenses, particularly in Europe and Mexico. While the investments are aimed at long-term growth, they contribute to higher expenses in the short term. This can make its financials look less appealing, especially in lighter quarters. The company acknowledges that the investments are not a straight line to success and involve a degree of testing and learning. This further paves a path for risk and uncertainty. Investors should be wary of these elevated expenses and their impact on the bottom line.
What’s Next for JAKKS Pacific?
Looking ahead, JAKKS Pacific is banking on several exciting product launches to drive growth in the latter half of the year. The company has expanded its lineup with new products related to major franchises, including The Simpsons, Frozen and Dog Man, which could provide much-needed revenue boosts. But the question remains: will these initiatives be enough to stabilize the stock?
Investors should also keep an eye on JAKK’s upcoming fall product introductions and whether its partnership with major retailers like Target can help drive stronger sales into 2025. Management remains optimistic about the long-term value regeneration, but the near-term headwinds cannot be ignored.
JAKK’s Valuation and Market Signals
On the bright side, JAKKS Pacific stock is trading at a forward 12-month price-to-sales ratio of just 0.4X, which is far below the industry average of 2.74X. That could make the stock look like a bargain to some.
Image Source: Zacks Investment Research
Additionally, the stock is currently trading above its 50-day moving average, which might suggest some upward momentum. However, technical indicators alone aren't enough to outweigh the broader challenges.
JAKK Shares Trade Above 200-Day SMA
Image Source: Zacks Investment Research
Our Take
Despite some encouraging product launches and retailer partnerships on the horizon, JAKKS Pacific’s immediate outlook remains cloudy. The declining sales, particularly in key international markets, rising costs, and a string of missed earnings estimates indicate that the company is struggling to find its footing.
While some investors might be tempted by the low valuation and recent stock momentum, the broader headwinds suggest that it’s time to sell. The Zacks Rank #5 (Strong Sell) rating further confirms our thesis. The near-term challenges and uncertain turnaround make it a risky bet in the current environment.
Image: Bigstock
JAKK Stock's Earnings Estimates Going Down: Hold or Fold?
The Zacks Consensus Estimate for JAKKS Pacific, Inc.’s (JAKK - Free Report) 2024 and 2025 earnings per share (EPS) has dropped by 14.3% and 10.3%, respectively, in the past 60 days. The downward revision in earnings estimates indicates analysts’ decreasing confidence in the stock.
The toy and consumer products company also missed the Zacks Earnings Estimates in the trailing three quarters.
Shares of JAKKS Pacific have declined 28.8% so far this year against the Zacks Toys - Games – Hobbies industry's 5.4% gain. The company’s share price performance also lagged industry players like Hasbro, Inc. (HAS - Free Report) , Mattel, Inc. (MAT - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) .
JAKK’s Price Performance
Image Source: Zacks Investment Research
Factors Acting as Headwinds for JAKK Stock
The company’s performance is negatively impacted by macroeconomic pressures and inconsistent demand, particularly in international markets. In the second quarter of 2024, net sales amounted to $148.6 million, reflecting an 11% decline compared to the previous year. The decline was largely attributed to year-over-year soft sales in the Toys/Consumer Products segment due to lower sales in North America and softer Disney sales, accompanied by a fall in Costumes sales due to reduced orders from select recurring costumes. For the quarter, Toys/Consumer Products segment sales were down 11.3% globally, and sales of Costumes were down 10.1% year over year. The downtrend was backed by a lack of new film releases.
While JAKKS Pacific has a strong slate of product launches planned for the second half of 2024, including toys linked to major movie franchises like Disney’s Moana 2 and Sega’s Sonic the Hedgehog 3, it’s unclear whether the new releases will be enough to reverse the current downward trend in sales.
One of the key weaknesses in JAKKS Pacific's recent performance is its international segment. During the second quarter, International sales dropped 31.1% year over year to $16.5 million. The company cited logistics issues in Asia and a content-light first half as reasons for the downturn. These factors, combined with macroeconomic headwinds and inconsistent consumer demand in key international markets, have significantly weighed on JAKKS’ ability to grow outside of North America.
JAKKS Pacific has been increasing its spending on infrastructure and SG&A (Selling, General, and Administrative) expenses, particularly in Europe and Mexico. While the investments are aimed at long-term growth, they contribute to higher expenses in the short term. This can make its financials look less appealing, especially in lighter quarters. The company acknowledges that the investments are not a straight line to success and involve a degree of testing and learning. This further paves a path for risk and uncertainty. Investors should be wary of these elevated expenses and their impact on the bottom line.
What’s Next for JAKKS Pacific?
Looking ahead, JAKKS Pacific is banking on several exciting product launches to drive growth in the latter half of the year. The company has expanded its lineup with new products related to major franchises, including The Simpsons, Frozen and Dog Man, which could provide much-needed revenue boosts. But the question remains: will these initiatives be enough to stabilize the stock?
Investors should also keep an eye on JAKK’s upcoming fall product introductions and whether its partnership with major retailers like Target can help drive stronger sales into 2025. Management remains optimistic about the long-term value regeneration, but the near-term headwinds cannot be ignored.
JAKK’s Valuation and Market Signals
On the bright side, JAKKS Pacific stock is trading at a forward 12-month price-to-sales ratio of just 0.4X, which is far below the industry average of 2.74X. That could make the stock look like a bargain to some.
Image Source: Zacks Investment Research
Additionally, the stock is currently trading above its 50-day moving average, which might suggest some upward momentum. However, technical indicators alone aren't enough to outweigh the broader challenges.
JAKK Shares Trade Above 200-Day SMA
Image Source: Zacks Investment Research
Our Take
Despite some encouraging product launches and retailer partnerships on the horizon, JAKKS Pacific’s immediate outlook remains cloudy. The declining sales, particularly in key international markets, rising costs, and a string of missed earnings estimates indicate that the company is struggling to find its footing.
While some investors might be tempted by the low valuation and recent stock momentum, the broader headwinds suggest that it’s time to sell. The Zacks Rank #5 (Strong Sell) rating further confirms our thesis. The near-term challenges and uncertain turnaround make it a risky bet in the current environment.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.