Here's Why You Should Retain Hasbro (HAS) in Your Portfolio
Hasbro, Inc. HAS is likely to benefit from solid gaming demand, product innovations and cost-saving efforts. Also, focus on the Wizards of the Coast and digital gaming business bode well. However, inflationary pressures are a concern.
Let’s discuss the factors that suggest why investors should retain the stock for the time being.
Major Growth Drivers
Hasbro is witnessing solid demand in its gaming sector, boasting a top-notch gaming portfolio that spans face-to-face, tabletop and digital gaming experiences on mobile platforms. In the third quarter of fiscal 2023, Transformers, Play-Doh, GI Joe and FURBY made notable and positive contributions to the company's performance. HAS emphasized ongoing investments in expansive, long-term gaming experiences to drive growth.
HAS is focusing on recentering efforts around the core mission of play. The divestiture of the film and TV division will simplify operations, allowing the company to refocus on its brands. Moving forward, entertainment initiatives will prioritize strategies that are driven by franchise strength, minimize assets and aim to boost toy and game sales. These efforts will be reinforced by esteemed content partners and a pipeline of more than 30 projects.
The emphasis on the Wizards of the Coast and digital gaming business bodes well. During the third quarter of fiscal 2023, the Wizard segment’s revenues increased 40% year over year. Approximately 23% of the growth stemmed from licensed digital gaming revenue, primarily backed by BG3 and MONOPOLY GO. Also, it reported contributions from MAGIC and D&D, largely influenced by release timing, including an additional magic release during the quarter compared with the previous year.
Analyzing the third quarter’s category trend indicates an expected slight upturn in the fourth quarter, marking a progression beyond last year's market declines. Retailers are likely to maintain cautious inventory levels, impacting the usual holiday ordering patterns.
Specifically, the projection for Wizards of the Coast indicates revenue growth in the high single-digits, propelled by robust performance in digital games and solid outcomes from MAGIC.
Increased focus on cost-saving initiatives bodes well. During the fiscal third-quarter earnings call, the firm announced that cost-cutting activities had exceeded 2023 targets, allowing for short-term inventory reductions as well as investments in consumer intelligence capabilities and growth plans.
A revamped supply chain resulted in substantial cost savings and more efficient inventory management. Consequently, this sets the stage for enhanced cash flow and decreased allowances in the forthcoming periods.
Concerns
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Shares of the company have declined 19.7% in the past three months against the industry’s growth of 7.5%.
The downside was primarily driven by planned license exits, a decline in toy and game volume (given the broad category trends), unfavorable pricing and mix and writer and actor strikes. The company remains vigilant regarding the ongoing impact of inflation on its business operations and may consider further price adjustments to offset potential changes in inflation rates in the future.
Zacks Rank and Stocks to Consider
Currently, Hasbro carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:
Stride, Inc. LRN sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LRN’s 2024 sales and earnings per share implies an improvement of 9.1% and 34.7%, respectively, from the prior-year levels. It has a trailing four-quarter earnings surprise of 44.3%, on average. Shares of LRN have soared 83.7% in the past year.
JAKKS Pacific, Inc. JAKK sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 61.8%, on average. Shares of JAKK have skyrocketed 82.5% in the past year.
The Zacks Consensus Estimate for JAKK’s 2024 sales calls for 3.6% growth from the year-earlier levels.
Accel Entertainment, Inc. ACEL carries a Zacks Rank #2 (Buy). ACEL has a trailing four-quarter earnings surprise of 27.7%, on average. Shares of ACEL have surged 18.9% in the past year.
The Zacks Consensus Estimate for ACEL’s 2024 sales calls for 2.7% growth from the year-earlier levels.
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Hasbro, Inc. (HAS) : Free Stock Analysis Report
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