Hasbro (NASDAQ:HAS) Lands New Buy Recommendation, Run With It

For a while there, Hasbro (NASDAQ:HAS) looked absolutely on top of the game. Holder of perhaps the biggest media juggernaut the market had seen in years with the “My Little Pony: Friendship is Magic” franchise, the company looked like it could write its own ticket. With the frenzy dying down around that property, though, it might have seemed like the company didn't have much to replace it with. However, new reports suggest quite the opposite has happened, to the point where Citi just started coverage on the company, and started off with a “buy”.

Exactly Like Selling Toys at Christmas

Basically, Citi set out its “buy” assessment on Hasbro for two simple reasons: one, it has a lot of intellectual property going for it, and two, it can readily turn all that intellectual property into a whole range of media offerings. We've already seen what it can do with adorable cartoon horses; considering all the other brands at Hasbro's disposal, it's not hard to envision lots of new, similar efforts rolling out.

One such effort is already in evidence; Hasbro is set to bring out a replica of the Amban Phase-Pulse blaster rifle, as seen in “The Mandalorian.” Naturally, it will be firing foam darts from the Nerf system, as opposed to high-energy particles, but for fans of Mando, it will be almost as good. The fact that said replica is running at $120 may turn some fans off, but for those who get in, it's good news for Hasbro. It tends to be good to be a toy seller at Christmas, as that's when many of the products involved are most in demand.

High-priced replica weaponry aside, Hasbro has quite a bit else going on for it, including the recent acquisition of Entertainment One. The production company should give Hasbro a range of new options to work with, including such familiar names as “Peppa Pig,” “PJ Masks,” and several others. It also provides some more hands-on expertise to continue turning Hasbro's already-available content into films and television releases.

Analysts Getting In on the Game

Meanwhile, the broader analyst consensus—based on our latest research—sits at a buy, as it has for the last six months. The ratios have changed slightly, but are still surprisingly close. Six months ago, the company had seven “hold” and 11 “buy” ratings. Today, it's six “hold” and 13 “buy” ratings, showing an increased interest in the company. Just last month, however, it was five “hold” and 12 “buy”, so the interest may be a bit on the cautious side.

The price target, meanwhile, has been in a recovery mode since three months ago. The average price target went from $91.72 six months ago to $85.76 three months ago, up to today, where it's now $92.60. Given Hasbro is trading at $90.38 as of this writing, it's clear there's still a little room for gain here.

Diversification is Market Strength

The upside for Hasbro is that it's not depending on any one product line to keep the company aloft. While its Mandalorian Nerf rifle is impressive enough to get some adults interested in picking one up, banking on a $120 Nerf gun as a Christmas present under many trees may seem a bridge too far, especially the way the economy is looking right now. With many considering which bills to pay and which to let go right now, expensive Christmas toys may not be a priority item.

However, Hasbro isn't just selling pricey toys. It has bargain-priced toys too, and many parents will likely pick up some just to keep from a heartbreaking Christmas morning. The entertainment properties will only help, as people turn to watching them long after Christmas has concluded. Since Hasbro has a piece of all of these, its chances of losing the market altogether are minimal. It may have competitors in the market—children and toys are not the combination they once were since video games showed up in the market—but it will likely still have some part of the market until there is no market any more.

This diversity—toys, games, movies and so on—give Hasbro an edge in the market. While many of its properties are more in the “nice-to-have” than the “necessity” range, the fact that it has so many different breeds of nice-to-have increase the chances of it capturing at least some of the market, and keeping profits coming into the Hasbro coffers. That makes for a sound investment going forward, since it's not likely to fail completely any time soon.