BofA Says Hasbro Stock Is A Long-Term Play

Hasbro, Inc. HAS closed the acquisition of Entertainment One ENTMF in an all-cash transaction valued at around $4 billion.

Although Hasbro’s story-led approach to monetize its intellectual property is a positive for the long term, the company’s shares are currency trading at a premium versus its toy manufacturing peers, according to BofA Securities.

The Analyst

BofA’s Bryan Goldberg initiated coverage of Hasbro with a Neutral rating and a price target of $117.

The Thesis

Hasbro is a global play and entertainment story, with a wide portfolio of brands that support healthy profits in the toy manufacturing, gaming, licensed product and filmed entertainment markets, Goldberg said in the note.

He explained that Hasbro had the backing of franchises like Nerf and Transformers, which gave the company around 1,500 play-oriented brands as strategic assets.

This strengthens Hasbro’s position to capitalize on monetization opportunities in the long term, as new mediums and digital formats evolve.

Goldberg believes Hasbro can grow its pro forma EBITDA at a compounded annual rate of 12% from 2018 to 2022, given the performance of its legacy business, favorable mix shift and synergies from the Entertainment One acquisition.

The analyst said, however, that the stock’s potential may remain limited in the near-to-medium term, given muted holiday sales in the fourth quarter of 2019, lingering impact of the U.S.-China trade war and tough 2020 Disney DIS product comparisons.