On Friday, Goldman Sachs updated its outlook on Hasbro (NASDAQ:HAS) shares, increasing the price target to $65.00 from $62.00, while maintaining a Neutral rating on the stock.
The adjustment follows Hasbro's second quarter of 2024 financial results, which surpassed expectations in terms of Revenue, Adjusted EBITDA, and Adjusted Diluted EPS.
Hasbro's revenue beat was largely attributed to its Wizards of the Coast (WOTC) segment, which saw higher than anticipated revenues and Adjusted Operating Profit. The success of WOTC was partly due to a favorable mix shift towards higher-margin digital licensing revenue and a reduction in royalty expenses.
However, the Consumer Products margins did not meet expectations, impacted by volume deleveraging, although this was partially mitigated by decreased operational expenses.
The analyst from Goldman Sachs expressed optimism about the demand and margin trends in Hasbro's Consumer Products segment as it exits the second quarter and approaches the back-to-school shopping period. This optimism is supported by expectations of a healthier retail environment and the introduction of new product innovations.
Despite the positive outlook for the Consumer Products segment, caution was advised regarding WOTC's future performance. The updated guidance from Hasbro suggested a more significant decline in tabletop revenue for the second half of 2024 than previously anticipated.
Additionally, projected revenues for the Monopoly Go product were lower than Goldman Sachs had estimated, at approximately $30 million per quarter compared to the $40 million Goldman Sachs estimate.
Goldman Sachs has revised its estimates for Hasbro's Revenues, EPS, and Free Cash Flow upwards, primarily reflecting the strength in the Consumer Products segment. The new 12-month price target of $65 is based on a 15.0x next twelve months plus one year (NTM+1Y) EPS, implying an estimated total return of 11%, which includes an approximate 5% dividend yield.
In other recent news, Hasbro has been the subject of several analyst upgrades and revised price targets, following a significant earnings beat and promising revenue results.
Citi has raised the toy company's price target to $67, citing optimism about Hasbro's digital strategy. The firm maintained a Neutral rating on Hasbro, emphasizing the potential benefits of the company's focus on digital games.
Roth/MKM also adjusted Hasbro's financial outlook positively, raising the price target from $75 to $82 while maintaining a Buy rating. The firm's analyst highlighted the effectiveness of Hasbro's turnaround strategy and the improved operating margin as key factors behind the upgrade.
CFRA upgraded Hasbro from Hold to Buy and increased its price target to $72, citing the company's continued improvement in operating margin, particularly as Digital Gaming becomes a more significant part of Hasbro's total revenue.
In related news, private equity firm L Catterton has made an acquisition offer to Mattel Inc (NASDAQ:MAT)., potentially sparking interest from other parties, including Hasbro. Mattel recently surpassed analysts' expectations for its second-quarter profits, thanks to stringent cost control measures, but experienced a 1% drop in net sales.
Despite these developments, Mattel's CEO expressed confidence in the company's prospects for the latter half of the year. These recent developments highlight the ongoing shifts and strategic decisions in the toy industry.
InvestingPro Insights
InvestingPro data indicates that Hasbro (NASDAQ:HAS) is navigating a complex financial landscape. With a market capitalization of $8.56 billion, the company's performance has been a mix of challenges and strengths. Notably, Hasbro is trading at a high Price/Book multiple of 7.3, suggesting that investors may have high expectations for the company's asset value and future growth. Despite a revenue decline of 18.34% over the last twelve months as of Q2 2024, the company has maintained a robust gross profit margin of 54.57%, which could indicate effective cost management in the face of declining sales.
InvestingPro Tips highlight that analysts are forecasting a turnaround in net income this year, providing a glimmer of hope for profitability. Additionally, Hasbro's commendable track record of maintaining dividend payments for 44 consecutive years, coupled with a current dividend yield of 4.55%, continues to make it an attractive stock for income-focused investors. However, it's important to note that three analysts have revised their earnings downwards for the upcoming period, signaling potential caution.
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