Magic: The Gathering remains a 'key risk' for Hasbro stock as collectors grow cautious on investing in new card sets
- Hasbro stock faces challenges with Magic: The Gathering, according to Bank of America.
- The bank said stores and collectors have grown more cautious about investing in new product sets of the game.
- "We still see Magic underperformance as a key risk especially in 2H23 as Hasbro laps a crowded release schedule," BofA said.
The bank highlighted ongoing headwinds for the popular card game after Hasbro flooded the market with a wave of new card sets and themed releases last year, arguably diluting the value of the card game known for fetching hundreds of thousands of dollars for ultra-rare cards and testing the loyalty of fans.
"There's a lot of wallet fatigue," Brooklyn-based Action City Comics owner Eric LaGaccia told Insider earlier this year. "In order to be competitive, you want the latest cards, and the cards you just spent a lot of money on are now obsolete."
And it's that "wallet fatigue" that could hurt the sales growth of Magic: The Gathering for Hasbro going forward, according to BofA analyst Jason Haas.
"While engagement in Magic remains solid, stores and collectors have been more cautious to invest in new product," Haas said. "We continue to see modest declines in prices for reserved list cards, while prices for more recent releases have held up okay."
Haas expects Hasbro's Wizards subsidiary that publishes Magic cards to report first-quarter revenue growth of just 2%, half the 4% growth rate expected by consensus.
"We still see Magic underperformance as a key risk especially in [the] second half of 2023 as Hasbro laps a crowded release schedule," Haas said, adding that Hasbro's guidance looks too optimistic.
Also not helping matters for Hasbro investors is disappointing ticket sales for the Dungeons & Dragons movie, which has only grossed $158 million worldwide in its first three weeks of release.
The reported budget of the movie was $150 million, which implies $375 million to $400 million in ticket sales are needed to break even after accounting for other expenses.
"The movie has been outshined by the success of Mario, and we do not believe it has driven much increased engagement with the game," Haas said.
He reiterated an "Underperform" rating on Hasbro stock and $42 price target, which represents potential downside of 19% from current levels.
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