Analysts at the Bank of America (BoA) have downgraded Hasbro (NASDAQ:HAS) and slashed their price target on the toymaker’s stock after it reported disappointing third quarter results on Thursday.
They awarded the stock a ‘Neutral’ rating and price objective of US$53, down from its prior price objective of US$90.
Hasbro (NASDAQ:HAS) shares fell 4.4% to US$46.26 on Friday and are down 15% week-over-week.
Investor sentiment towards toymakers turned negative this week on Hasbro (NASDAQ:HAS)’s weak 3Q results and comments from Barbie-maker Mattel, Inc (NASDAQ:MAT) about softening demand heading into the holiday season.
The BoA analysts had recently upgraded Hasbro to a ‘Buy’ rating on their expectation of a stronger beat in the Wizards of the Coast (WOTC) segment on the back of its Lord of the Rings Magic set and royalty revenue from Baldur's Gate 3 and Monopoly Go.
“Hasbro did report very strong 3Q WOTC (up 38% year-over-year versus the consensus expectation of 26%) but unfortunately its Consumer Products (CP) sales declined 19% year-over-year, well below our negative 13% estimate and consensus negative 5%,” they wrote in a note to clients.
“We're impressed by the very strong WOTC results this year which meaningfully exceeded our initial expectations but now set up for a hard compare as Hasbro needs to lap Lord of the Rings and Baldur's Gate 3.”
The uplift in Hasbro’s 3Q results from Baldur’s Gate and Monopoly Go was not enough to offset toy weakness, the analysts wrote.
However, they believe Hasbro can successfully turn around its toy business but are concerned this will occur more in 2025 than in 2024.
“We remain bullish on [Hasbro president] Tim Kilpin's ability to turn around Hasbro’s toy business but recent commentary suggests this may happen more in 2025,” they wrote.
“We likewise remain bullish on CP margin expansion especially as Hasbro laps the first half of 2023 destocking and cost savings flow-through, but the starting base is lower than we previously thought.”
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