Here's Why Investors Should Retain JAKKS Pacific (JAKK) Stock
JAKKS Pacific, Inc. JAKK is likely to benefit from a solid international footprint, product expansions and digital initiatives. However, coronavirus-induced supply chain disruptions and increased freight expenses are a concern.
Let’s delve deeper.
Growth Catalysts
JAKKS Pacific is committed to diversifying its footprint outside the United States. Consistent with its endeavors, the company opened sales offices and expanded product distribution agreements. Its partnership with Meisheng is anticipated to result in robust growth in Asia. During the third quarter of 2021, the company made progress with respect to direct distribution in France, Spain, Italy and Mexico. It is witnessing solid growth in Latin America and Europe. During the first quarter of 2022, the company announced distribution partnerships in the United States and Asia-Pac with Wow! Stuff, a European-based toy innovation company, for two fresh product lines. This is likely to drive growth in the upcoming periods.
The company has been focusing on new product launches to drive growth. During third-quarter 2021, the company initiated a new doll program (in the United States) in association with Disney and Target. Branded as Disney ily 4EVER, the fashion line comprises 18 installs or related accessories inspired by Disney stories and caricatures. This includes the likes of Minnie Mouse, Tinkerbell, Stitch, Ariel, Elsa, Rapunzel and more. The company is also inclined toward innovations and product expansions to drive growth. To this end, it has planned an extension of lines and categories across businesses like Disney Princess, the Star collection, and Perfectly Cute in the Dolls and Roleplay aisles and Super Mario, Black & Decker, Apex Legends in Action and Play Collectible aisles.
The company realized the importance of online retailing and shifted its focus to aggressively boosting online sales. Over the past few quarters, JAKKS Pacific has been committed to creating digital experiences for online shoppers, such as videos, 360-degree product images and enhanced web pages. It continues to modify its sales and logistics capabilities to capitalize on this continued shift to online. During first-quarter 2022, POS at the company’s top three U.S. customers rose 40%. The company is optimistic about its robust customer demand and continuously makes timely brand developments and product innovations to drive margins.
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The company’s shares have increased 28% so far this year against the industry’s 0.1% decline.
Concerns
The coronavirus outbreak has been wreaking havoc globally. It is no surprise that the Toys – Games – Hobbies industry has been grappling with the scenario, and JAKKS Pacific isn’t immune either. Due to this, the company’s operations were negatively impacted by supply chain disruptions in first-quarter 2022. Although the company has undertaken substantial measures to overcome the same, extra transportation and storage expenses remain headwinds. In the first quarter, gross margin came in at 24.7%, down 640 basis points from 31.1% reported in the prior-year quarter. The downside was mainly caused by a rise in inbound freight expenses. The company is actively monitoring the global situation and the resulting impact on its financial condition, liquidity, operations, suppliers, industry and workforce.
Zacks Rank & Key Picks
JAKKS Pacific has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation BVH, Civeo Corporation CVEO and Boyd Gaming Corporation BYD.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 44% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Civeo sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 1,565.1%, on average. Shares of the company have increased 52.7% in the past year.
The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS suggests growth of 12.5% and 1,450%, respectively, from the year-ago period’s levels.
Boyd Gaming carries a Zacks Rank #2 (Buy). BYD has a trailing four-quarter earnings surprise of 24.2%, on average. Shares of the company have declined 15.7% in the past year.
The Zacks Consensus Estimate for Boyd Gaming’s current financial year sales and EPS suggests growth of 6.8% and 3%, respectively, from the year-ago period’s reported levels.
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