On Thursday, Citi updated its stance on Hasbro (NASDAQ:HAS), increasing the toy company's price target from $64.00 to $67.00, while maintaining a Neutral rating. The revision follows a notable performance by Hasbro shares, which saw a 3.5% rise in Thursday's trading session, outpacing the flat movement of the S&P 500.
The analyst from Citi attributed the price target hike to a significant earnings beat driven by unexpected revenue from the game Monopoly Go!, which has bolstered investor confidence in Hasbro's digital transformation strategy.
Additionally, the modest increase in the company's guidance, despite the substantial earnings beat, was not seen as a result of management's concerns but rather as a misjudgment by analysts.
The new price target reflects Citi's raised estimates but does not alter the firm's Neutral rating on Hasbro. The analyst highlighted that while the recent earnings beat has shone a light on the potential benefits of Hasbro's focus on digital games, the stock's future performance would likely depend on the sustainability of its social games revenue, signs of recovery in the consumer products business, and successful advancement in the company's shift towards a more digital-oriented business model.
Hasbro's recent success in the stock market has made it the top performer within Citi's leisure coverage for the year. The company's efforts to adapt to a changing market by enhancing its digital game offerings appear to be resonating with investors, as evidenced by the positive stock movement.
However, for Hasbro's stock to continue on an upward trajectory, the company will need to demonstrate the long-term viability of its current strategies and business segments.
In other recent news, Hasbro's financial outlook has been positively adjusted by Roth/MKM, raising the toy company's price target from $75.00 to $82.00 while maintaining a Buy rating. This follows Hasbro's second-quarter earnings report, which surpassed consensus estimates with a normalized EPS of $1.22 and reported revenue of $995 million.
The firm's analyst cited factors such as the effectiveness of Hasbro's turnaround strategy, improved operating margin, and promising full-year guidance as reasons for the upgrade.
In addition, CFRA upgraded Hasbro from Hold to Buy and increased its price target to $72 from $59. The firm raised its EPS estimates for Hasbro for 2024 and 2025, citing continued improvement in operating margin, especially as Digital Gaming becomes a larger part of Hasbro's total revenue.
JPMorgan also upgraded Hasbro stock from Neutral to Overweight, highlighting cost efficiency and digital gaming growth. Meanwhile, Hasbro's full-year forecast expects a decrease in consumer product segment revenue by 7% to 11%.
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 to $1.08 billion. Despite these developments, Mattel's CEO expressed confidence in the company's prospects for the latter half of the year.
InvestingPro Insights
In light of Citi's updated stance on Hasbro (NASDAQ:HAS), investors might find the following InvestingPro Insights valuable. With a market capitalization of $8.56 billion, Hasbro's financial health appears robust, as their liquid assets exceed short term obligations, reflecting a strong liquidity position. Despite the challenges, analysts predict the company will be profitable this year, which aligns with the positive sentiment surrounding Hasbro's earnings beat and digital transformation strategy.
From a valuation perspective, Hasbro's P/E ratio is currently negative at -7.98, influenced by recent performance. However, the forward P/E ratio for the next twelve months stands at 34.0, indicating market expectations of a turnaround in profitability. The company's dividend yield is 4.55%, which is notable considering Hasbro has maintained dividend payments for 44 consecutive years—a testament to its commitment to shareholder returns.
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