Hasbro Is Going On The Offensive

Hasbro (HAS) is turning the corner and going on the offensive with a slew of revenue verticals with its Disney toy licensing deal (Marvel, Star Wars and Disney Princess lines), Hasbro Studios (Transformers’ Bumblebee, My Little Pony, Power Rangers), E-Sports (Dungeons and Dragons and Magic: The Gathering) and reinventing its legacy games (Monopoly and Nerf) while driving newer products (Beyblades). Hasbro blew out expectations for its Q1 2019 earnings and the stock jumped 16% breaking out above the $100 threshold, a level that hasn’t been seen in over 6 months. Hasbro is setting the post-Toys-R-Us bankruptcy narrative and laying out a business roadmap for long term profitable growth across its brands. Hasbro has had the tough task of getting out in front of the Toys-R-Us bankruptcy and working its way through the glut of merchandise. This positive sentiment has been further bolstered by positive commentary from its CEO that the company has effectively absolved itself of the Toy-R-Us related bankruptcy headwind. Hasbro has a compelling future across its portfolio with many catalysts on the near and long term time horizons.

Q1 2019 Earnings

Hasbro posted an unexpected profit for Q1 with EPS coming in at $0.32 against expectations of -$0.11, beating estimates by $0.32 per share. Revenue also came in much higher than expected with $732.5 million and beating estimates by 66.5 million (Figure 1).

“The global Hasbro team is executing very well and delivered a good start to the year,” said Brian Goldner, Hasbro’s chairman and chief executive officer. “Our long-term investments in new platforms provided a meaningful contribution from our digital and e-sports initiative, Magic: The Gathering Arena, as well as growth in MAGIC: THE GATHERING tabletop revenues. In addition, MONOPOLY, PLAY-DOH and TRANSFORMERS were among the brands posting revenue gains this quarter. We are beginning to see improvement in our commercial markets, notably in the U.S. and Europe, and operating profit was driven by high margin revenue growth and our cost savings activities. With most of the year ahead of us, we remain on track to deliver profitable growth for the full-year 2019.”
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Disney - Avengers: Endgame, Streaming, and Fox

Disney (DIS) is looking to continue off of Captain Marvel’s success with Avengers: Endgame debuting April 26th, 2019. Captain Marvel has already brought in more $1 billion in worldwide box office revenue and leading all 2019 movies by a wide margin. Disney is betting huge on Avengers: Endgame taking the torch to the $2 billion box office milestone, a feat that’s only been accomplished four times, one of them being Avengers: Infinity War last year with $2.05 billion. All the initiatives that Disney has taken over the previous two years to restore growth appear to be coming to fruition, namely its Fox (FOX) acquisition and it's streaming initiatives. The Fox acquisition is complete for the combined entity; thus Fox’s assets are now definitively being absorbed by Disney. Disney continues to invest heavily into its streaming services such as Hulu, ESPN Plus and it's soon to be released Disney branded streaming service that will directly compete with Netflix (NFLX). The Fox acquisition brings a majority stake in Hulu (60% ownership) while its ESPN Plus launched earlier this year and has over 2 million subscribers. Disney continues to dominate at the box office while posting great growth at its theme parks translating into robust and durable revenue streams. The company is evolving to meet the new age of media consumption demands of the consumer via streaming and on-demand content. Disney has been on an uptrend as of late, breaking through the $115 relative to an all-time of ~$120. I’ve been behind Disney for a long time, especially through this transition back to growth and I still feel that the company offers a compelling long-term investment opportunity given its growth catalysts that will continue to bear fruit over the coming years. Goldman Sachs recently championed Disney’s reinvention efforts and boosted its target price to $142, a 20% increase from the $115 current share price.

Goldman Sachs Backs Fox Acquisition and Future

Goldman Sachs has changed its view on Disney after the investment bank removed Disney from its buy recommendation in December of 2017. Now Goldman Sachs has come out to back Disney and labeled the stock as a buy. It's "the dawn of a new era" after the company bought the media assets of Twenty-First Century Fox, the acquisition which Goldman advised. Now the impending launch of Disney Plus marks a "momentous" shift in content monetization, though investors will need to be patient with some heavy lifting around the launch, suggests Drew Borst. Continue reading "Disney - Avengers: Endgame, Streaming, and Fox"

Hasbro: "We're Past the Toys "R" Us Debacle"

The Toys “R” Us bankruptcy has proven to be an albatross around Hasbro’s neck despite the confident, forward-looking narrative that’s been put forth for the previous two quarters by its CEO. The recent fourth-quarter earnings were disappointing, to say the least, capping off its historically best quarter. Revenue declined on an annual and quarterly basis by 12% and 13%, respectively. Despite these Toys “R” Us headwinds, Hasbro remains confident as the company annualizes the inventory glut caused by the liquidation. Hasbro (HAS) has a compelling future across its portfolio with many catalysts on the near and long term time horizon. This confident future was reinforced with an 8% increase in its quarterly dividend payout despite its revenue declines.

Hasbro is setting the post-Toys “R” Us bankruptcy narrative and laying out a business roadmap for long term profitable growth across its brands. This sentiment has been further bolstered by positive commentary from its CEO that the company will absolve itself of this Toy “R” Us related bankruptcy headwind come 2019. There's many current and future growth catalysts for Hasbro in movie franchises such as Marvel, Star Wars and other Disney (DIS) properties (Hasbro is the exclusive toy maker), potential e-sports with Dungeons and Dragons and Magic: The Gathering, newly acquired Power Rangers franchise which will emulate Hasbro’s My Little Pony and Transformers’ Bumblebee within Hasbro Studios and its legacy games such as Monopoly and Nerf.

Jim Cramer’s Mad Money 2018 Interviews

Hasbro’s CEO Brian Goldner has had a string of interviews with Jim Cramer on Mad Money. Over the past year, Goldner has had the tough task of getting out in front of the Toys “R” Us bankruptcy and glut of merchandise. Continue reading "Hasbro: "We're Past the Toys "R" Us Debacle""

Disney - Compelling Long-Term Investment In 2019 and Beyond

Stocks are entering 2019 in bear market territory and posted its worse quarter since the Great Depression after imploding in Q4 of 2018. Disney (DIS) has been a diamond in the rough given the negative backdrop albeit down from its 52-week high by 8%. This stock has bucked the negative trend and has demonstrated its resilience during this period. As this sell-off presents itself, long-term investors may want to take advantage of this weakness and initiate a position in this high-quality company at a discount. All the initiatives that Disney has taken over the previous two years to restore growth appear to be coming to fruition, namely its Fox (FOX) acquisition and its streaming initiatives. The Fox acquisition is complete now that the U.S. and China provided the green light for the combined entity thus Fox’s assets are now definitively being absorbed by Disney. As part of the contingencies, Disney is divesting its 39% Sky ownership stake that it acquired via the Fox acquisition to Comcast (CMCSA). This divestiture enables Disney to reduce its debt that was required to purchase the Fox media assets and will allow more investment into its streaming services such as Hulu, ESPN Plus and its Disney branded streaming service that will directly compete with Netflix (NFLX). The Fox acquisition brings a majority stake in Hulu (60% ownership) while its ESPN Plus launched earlier this year and had over 1 million subscribers in its early phases of being rolled out. Disney continues to dominate at the box office while posting great growth at its theme parks translating into a robust and durable revenue stream. The company is evolving to meet the new age of media consumption demands of the consumer via streaming and on-demand content. To this end, shareholders and analysts are beginning to resonate with Disney’s vision for future growth. This was reflected in its stock and had appreciated to a 52-week high before the market wide meltdown. Disney offers a compelling long-term investment opportunity in light of the recent weakness given its reinvention catalysts that will continue to bear fruit over the coming years. Continue reading "Disney - Compelling Long-Term Investment In 2019 and Beyond"

Hasbro Stock Struggling To Find Footing

The retail cohort reported a mixed bag during the most recent earnings season with Target (TGT), Khol’s (KSS), Gap (GPS), WalMart (WMT), Best Buy (BBY) and the Retail ETF (XRT) all experiencing downward pressure. This pressure has been exacerbated by the market wide sell-off in the broader indices. Hasbro (HAS) has struggled to find its footing moving into its historically biggest quarter. Hasbro is setting the post Toys R Us bankruptcy narrative and laying out a business roadmap for long-term profitable growth across its brands. The headwinds attributable to the bankruptcy of Toy R Us appear to be subsiding. This sentiment has been further bolstered by positive commentary from its CEO that the company will absolve itself of this Toy R Us related bankruptcy headwind come 2019. As Hasbro realigns and effectively manages the Toy R Us liquidation, this challenging backdrop is beginning to resolve itself to Hasbro's benefit. There are many current and future growth catalysts for Hasbro in movie franchises such as Marvel, Star Wars and other Disney (DIS) properties (Hasbro is the exclusive toy maker). Potential e-sports with Dungeons and Dragons and Magic: The Gathering, newly acquired Power Rangers franchise which will emulate Hasbro’s My Little Pony and Transformers’ Bumblebee within Hasbro Studios and its legacy games such as Monopoly and Nerf. Hasbro may benefit from a strong consumer, record low unemployment, a strong and growing dividend yield, clear skies post Toy R Us liquidation and putting forth initiatives within Hasbro Studios to further propel growth thus presenting a compelling long-term buy.

E-Commerce Channels Mitigating Toys R Us Bankruptcy

Analysts are predicting e-commerce toy orders to balloon to 40% of overall sales this year, up from 28% last year. Since Toys R Us has gone bankrupt, this puts a void of ~14% of last year’s U.S. toy sales that needs to be bridged, translating into $2.5 billion in revenue. This void will likely be filled by Target, Walmart and Amazon (AMZN) which recently, for the first time it will offer free shipping to everyone through the day before Christmas with no minimum purchase required. Per Jefferies analyst Stephanie Wissink, 70% of toy sales occur during the holiday season. Target and Walmart have announced expanded free-shipping programs of their own to drive online sales. Wissink sees Hasbro’s stock hitting $120 within a year and notes that the overall set-up for 2019 looks better than 2018. As other retail chains close the gap with the Toys R Us vacancy, Hasbro will likely return to form and growth across its brands. Hasbro has one more quarter to report earnings in which the Toys R Us issues will be impacting its numbers. 2019 will be free of this headwind, and all numbers will come full circle and be compared to post Toys R Us landscape. Continue reading "Hasbro Stock Struggling To Find Footing"