Roth/MKM Positive on Hasbro (HAS): 'Executing Well In A Challenging Environment'

Roth/MKM analyst Eric Handler reiterated a Buy rating and $92.00 price target on Hasbro (NASDAQ: HAS).

The analyst comments "We recently hosted a meeting with Hasbro that reinforced our positive view towards its multi-year growth prospects and its ability to meet 2025 estimates. The Consumer Products segment appears positioned for a return to growth in 4Q with optimism towards key entertainment drivers in 2026. WOTC remains the primary growth driver with an expanding Magic: The Gathering eco-system. Video games offer optionality. PT remains $92 (~18x/11.5x our 2026E EPS/adj. EBITDA). Retail outlook for Consumer Products appears to be holding up as expected. According to management, there does not appear to be anything materially different at retail relative to what it saw exiting 2Q. Retailer shelf resets are happening later than normal this year (late September/early October), making the year a bit more 4Q weighted, but that was reflected in guidance. Tariff impacted inventory is just beginning to hit retail. As a result, pricing discussions are taking shape. Looking towards the holidays, expectations are elevated for the Play-Doh Barbie Design products. Also, action figures, Peppa Pig, and games are notable focus areas. Exiting 2025 as clean as possible is an important goal as management is very excited about its entertainment driven lineup in 2026, especially within action figures. Next year will be a big opportunity for licensing partnerships led by three major movie releases: (1) Star Wars: The Mandalorian & Grogu on 5/22/26; (2) SpiderMan: Brand New Day on 7/31/26; and (3) Avengers: Doomsday on 12/18/26. Magic: The Gathering (MTG) remains a juggernaut: The WOTC segment is tracking for growth of nearly 30% in 2025 (and potentially higher when all is said and done at year-end). Leading the way is MTG, which is pacing towards all-time high results of >$1.4bn (+35% y/y). Expanding player counts have been aided by the success of the Universes Beyond series of card sets, most notably this year's record setting Final Fantasy set. In addition, the growing player base (including the return of lapsed players) has produced strong backlist/catalog sales and created greater interest in the DTC Secret Lair card sets. Our own research indicates presale inventories for upcoming Universes Beyond sets, Marvel: Spider-Man (9/26 release) and Avatar: The Last Airbender (11/21 release), are sold out, suggesting higher reprint volumes are likely. In addition, retail check points suggest the Edge of Eternities set (8/1 release) sold well. The upcoming MagicCon Atlanta (11/13-11/15) should produce multiple reveals for the 2026 lineup. Already announced is Lorwyn Eclipsed with a 1/23/26 release date. This release is notable as it is the first time in several years that Magic is starting a year with a new in-universe set rather than a remastered set, which as a result, should fuel a positive y/y growth comparison. Nothing is known yet regarding any new Universes Beyond sets, although given the mega-franchise movie launches next year, sets based on Star Wars and/or Avengers would not be surprising. Video games not a primary part of the portfolio but offers optionality: Hasbro's first in-house produced video game, Exodus, remains on track for a 2H25 launch. Expectations for this sci-fi, role playing game and new IP should be modest, as we are estimating 2.5mn units sold during the year with $125mn of revenue. Given the one-time costs of starting up a video games enterprise and a number of first time learnings, profit expectations are very muted. Titles in the pipeline to follow Exodus are all anchored around existing Hasbro IP with lower development budgets. Ultimately, Hasbro would like to see 1-2 video game releases annually. Since joining WOTC in July 2024 as President, John Hight (former Blizzard/World of Warcraft executive) has brought a much more disciplined framework to Hasbro's video games operations including shifting the tone and tenor of certain games, canceling some games, and playing around with capital intensity through recent co-development and co-publishing announcements."

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Shares of Hasbro closed at $73.92 yesterday.

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