On Thursday, JPMorgan made a notable change in its view on Hasbro (NASDAQ:HAS), upgrading the stock from Neutral to Overweight and increasing the price target to $74 from $61. The firm's analyst cited several reasons for the positive outlook on the toy manufacturer.
The first point highlighted is that JPMorgan's estimates for Hasbro remain ahead of the general consensus, particularly in areas of cost efficiency and digital gaming, which are expected to see growth in the second half of 2024 and the first half of 2025.
The analyst emphasized that their estimates have not changed and they believe the consensus is underestimating these aspects of Hasbro's business.
Next, the analyst pointed to the broader industry's potential for growth in the current year despite a shorter holiday season. There is an expectation of increased activity in low ticket and short replacement cycle categories.
Retailers, especially Target, which is a significant player in the U.S. market, are anticipated to drive customer traffic through events, with toys being a key focus.
Hasbro, in particular, is well-positioned to benefit in the latter half of 2024 due to the timing of the Transformers franchise release and early gains from merchandising improvements under new management.
Finally, JPMorgan projects that by the end of 2025, Hasbro will fully realize the benefits of its $750 million cost reduction program. Additionally, the firm expects that the consumer products segment will grow due to increased innovation and the momentum from Magic: The Gathering's expansion into new universes, such as Final Fantasy and Marvel, coupled with continuing support from Modern Horizons 3.
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