On Monday, Stifel reported a significant increase in short interest for toy manufacturers Hasbro and Mattel (NASDAQ:MAT), with jumps of 22% and 14% respectively, in the latter half of October. The firm noted that toy stocks are trading at a 36% discount compared to the S&P 500, with valuation multiples at 13.8 times forward consensus earnings per share (EPS), 7.7 times earnings before interest, taxes, depreciation, and amortization (EBITDA), and 1.3 times forward consensus revenue estimates.
The update from Stifel also highlighted that U.S. toy industry sales remained flat year-to-date through September, according to Circana, but showed a 37% increase compared to the same period in 2019. New product launches included Hasbro's Star Wars action figures from upcoming games and special editions of Monopoly, while LEGO introduced new sets aimed at adult consumers.
In terms of partnerships, Mattel and Verizon (NYSE:VZ) have initiated a new marketing campaign featuring Barbie, and Mattel also secured a licensing deal with I'm the Chef Too! for Barbie-themed baking kits. Hasbro collaborated with Nike (NYSE:NKE) on a Monopoly edition themed around Lebron James, and Funko (NASDAQ:FNKO) partnered with Warner Bros for Harry Potter-themed accessories. Additionally, PMI Kids launched a toy line that merges Stumble Guys with Barbie.
Entertainment updates within the industry included the postponement of an untitled Star Wars movie, originally set for a December 2026 release, while Disney (NYSE:DIS) confirmed that Ice Age 6 will launch in the same month. In corporate news, WildBrain appointed Erin Morris as its first vice president of strategic franchise and retail.
Box office results revealed that "Venom: The Last Dance" achieved a global box office of $436 million, with domestic earnings estimated at $128 million. "The Wild Robot" also performed well, with a global box office of $309 million and domestic earnings estimated at $138 million. In commodities, West Texas Intermediate (WTI) crude oil was priced at $66.92, marking a 12% year-over-year decline, and Brent crude oil stood at $71.04 last week, similarly down by 12% from the previous year. The average retail gasoline price was reported at $3.05, a 9% decrease year-over-year, for the week of November 11 by the U.S. Energy Information Administration.
Shipping data showed a 2% year-over-year decrease in the Baltic Dry Index for the week ending November 15th, while import cargo volume at the Port of Long Beach and Los Angeles experienced a 14% increase year-over-year in September. The U.S. dollar index rose by 1.73 last week, showing a 3% increase from the previous year. The overall short interest in the toy sector rose by 12% during the October 15 to October 31 period.
In other recent news, Hasbro Inc (NASDAQ:HAS). reported a mixed bag of results in its third-quarter earnings call for 2024. Total (EPA:TTEF) revenue for the quarter was $1.3 billion, reflecting a 15% decline from the previous year, primarily due to the divestiture of Entertainment One. Despite this setback, Hasbro managed to expand its operating profit margin for the third consecutive quarter, largely driven by robust growth in games and licensing. Magic: The Gathering, Dungeons & Dragons, and licensing revenue from Monopoly Go! were standout performers.
Citi maintained its Neutral rating on Hasbro, despite a 6% drop in the company's shares and weaker-than-expected sales trends as the holiday season approaches. The firm's stance remained unchanged due to the mixed financial results, balancing strong performance in certain segments against underwhelming consumer product sales.
Looking ahead, Hasbro lowered its full-year revenue guidance for the Consumer Products segment but anticipates significant profit growth. The company is also targeting $750 million in cost savings by 2025, with $240 million achieved this year.
InvestingPro Insights
To complement the analysis of Hasbro's market position and the broader toy industry landscape, InvestingPro data offers additional insights into the company's financial health and market performance.
Despite the challenging environment described in the article, InvestingPro Tips suggest that Hasbro's net income is expected to grow this year, and analysts predict the company will return to profitability. This positive outlook aligns with the industry's resilience noted in the article, where U.S. toy sales have shown significant growth compared to 2019 levels.
InvestingPro data reveals that Hasbro's revenue for the last twelve months as of Q3 2024 stands at $4.32 billion, with a gross profit margin of 56.52%. While these figures are substantial, the company has experienced a revenue decline of 19.84% over the same period, reflecting the challenges mentioned in the article regarding short interest increases and industry valuation discounts.
An InvestingPro Tip highlights that Hasbro has maintained dividend payments for 44 consecutive years, with a current dividend yield of 4.5%. This consistent dividend history may be attractive to investors, especially given the article's mention of new product launches and partnerships, which could support future revenue streams.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Hasbro, providing a deeper understanding of the company's financial position and market outlook.
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