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LATEST NEWS

Hasbro Stock Takes a Hit - Buy Now?

Posted by Bret on 07/25/17 at 05:22 PM Category: Hasbro
Hasbro
This is bad? Nope


Hasbro announced its Q2 results yesterday, posting net income of $67.7M for the quarter, or earnings per share (EPS) of $0.53. This number greatly exceeded forecasters' estimates of $0.46 EPS, and was far above Q2-2016's EPS of $0.41. This is good news for Hasbro. Additionally, revenue rose by 10.6% to $972.5M, just near most estimates. This is also a good showing.

None of this sounds like bad news, does it? That's because it isn't.

Nevertheless, Hasbro stock took it on the chin, dropping around 9% after the announcement.

Hasbro results were propped up by a 21% rise in what are called "franchise brands", which include the likes of Transformers, Nerf, My Little Pony, etc. This part of Hasbro performed well, and was supported by strong Transformers sales due to The Last Knight toys. The segment that includes some "Emerging Brands" like Playskool and Easy Bake Oven took a hit, dropping as much as 14%. Licensed brands like Star Wars and Marvel were weak, mostly due to the timing of falling into a weird quarter that was after the Rogue One surge had passed, but before Spiderman: Homecoming took hold.

To see why the eye-catching headlines that indicate doom for Hasbro are not an accurate portrayal of the situation, it's important to understand how the stock market works.

Hasbro has been on a very long growth streak, as you can see in the 5 year stock price graph above (including a nearly 50% rise in 2017 alone through Friday, and still up 37% as of today). Even when financial results are strong, investors that were riding the wave have always been looking for the slightest excuse to jump ship and cash in. The results in Q2 were strong and more or less met or exceeded expectations, but because the numbers weren't a mind-altering slam dunk this time, investors sold. It's called a "correction", and is a part of the market fabric. What it means is that short-term investors are taking a bit of a break from super-hot Hasbro stock, but the more conservative long-run investors that have been waiting for their moment to "bargain hunt" may now have their opportunity to get in the game and bet on Hasbro's success continuing into the future. Hasbro will benefit in the next quarter from Spiderman and, to some degree, The Last Jedi (bigger benefits will be had in Q4).

It should be duly noted that while the stock price dropped significantly Monday, it had just reached an all-time high of $116.20 on Friday. Today the stock price stabilized, and had made up some of the ground by close, settling at $106.32.

So if you're thinking that this is Hasbro's comeuppance for wrecking your dreams because you can't find that 6" 40th Anniversary Han Solo at your local Target, try again. Instead, consider buying Hasbro stock while it is (marginally) down. It's an opportunity if you're a long-term investor.




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