Hasbro Stock Drops 8% on Self Inflicted Supply Woes

One of the world’s most popular toy and game makers is taking a serious hit during Monday trading – following up on last week’s volatility. So far this morning the stock has dropped 8% lower than it opened. This comes as one analyst at Bank of America performed a deep dive into the company’s major business driver and identified severe concerns.

You may know Hasbro for products like Monopoly, Nerf, Play-Doh, and other popular toys. The company doesn’t just sell its own toys and games – it promotes other brands through licensing and trademarks. But today’s discussion is centered around Hasbro’s pride and joy: Magic the Gathering.

This strategic, collectible card game was released almost three decades ago. And according to Jason Haas of Bank of America, the end could be near.

Since the pandemic, Hasbro has increased the supply of Magic cards – which has been great for Hasbro in the short term. The company more frequently rolls out new sets, with more products in each set and wider distribution. While the financials have certainly been favorable, it may not be all sunshine and roses much longer.

Hass interviewed players, collectors, distributors, and even local game stores surrounding the moves Hasbro has made recently. All parties agree that this is going to wreak havoc on the long-term value of the brand.

The increased supply has created confusion and chaos in the secondary market – and players are choosing to play with older cards rather than the “latest and greatest”. As a result, distributors, collectors, and local game stores are losing money on the game. This is coupled with the fact that Magic’s 30th Anniversary set is egregiously overpriced at $999.

When you consider the fact that Magic the Gathering makes up 15% of the company’s revenue and almost 35% of EBITDA, you can see why there is cause for concern here. And as a result, Haas double-downgraded the stock, cutting his $72 price target all the way down to $42/share.

But – is this an overreaction?

If you’re currently invested in Hasbro or are looking for an opportunity to trade the stock after this dip, you want a clear answer on what your next move should be.

Let’s look beyond all the noise and evaluate HAS stock through tried-and-true financial analysis. VectorVest’s stock analysis software has identified 2 major issues that investors need to take note of before doing anything else with HAS stock. Here’s the scoop…

2 Major Issues with HAS Stock You Need to See Before Your Next Move

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These ratings are easy to understand and glean insights from as they sit on a scale of 0.00-2.00. The higher the number, the better – and vice versa. But the best part is that based on these three ratings, VectorVest is able to provide you with a clear buy, sell, or hold recommendation for any given stock at any given time. Here’s the current situation with HAS:

• Very Good Upside Potential: Despite analyst sentiment, VectorVest deems the long-term price appreciation potential for HAS to be very good with an RV rating of 1.31. This is coupled with the fact that HAS is undervalued at the current price of $58.33. VectorVest calculates the current value to be $71.32. However, this is where the good news ends for HAS stock.
• Fair Safety: An indicator of risk, the RS rating analyzes a company’s financial consistency and predictability, debt-to-equity ratio, and business longevity. As for HAS, the RS rating of 0.89 is below average – but fair, nonetheless.
• Poor Timing: This is the biggest issue facing HAS stock right now – the poor price trend it’s shown for more than a year now. Despite temporary pumps along the way, the overall trajectory has been downward for some time – and the poor RT rating of 0.50 reflects that. This is calculated based on the direction, dynamics, and magnitude of a stock’s price movement day over day, week over week, quarter over quarter, and year over year.

All of this works out to an overall VST rating of just 0.92 – which is fair. But given the major issue with timing and the lack of safety surrounding this stock, is it finally time to sell HAS? Or should you wait for the noise around this stock to settle down and see what’s waiting on the other side? To get a clear buy, sell, or hold recommendation on your next move, get your free stock analysis through VectorVest here. You’re not going to want to miss out on this one…

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VectorVest advocates buying safe, undervalued stocks, rising in price. As for HAS, it is undervalued with very good upside potential, fair safety, and poor timing.

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