Revenue Mix Shift and Cost Savings Lift Hasbro Toward a 20% Operating Margin; Shares Attractive

We don’t plan any material change to our $104 fair value estimate for narrow-moat Hasbro after digesting the opportunities and risks articulated at its investor day. The firm laid out a robust five-year outlook, calling for mid-single-digit top-line growth that leads to more than $8.5 billion in sales in 2027, which is above our $7.9 billion estimate. The differential stems from gaming revenue that is set to rise at high-single to low-double-digit rates through 2024 before accelerating as near-term investments pay off. We had forecast Wizards of the Coast, or WOTC, and digital games growing at mid-single-digit rates over time, so we now plan to bump them up. Impressively, Hasbro lifted its long-term operating margin prognosis to above 20%, versus the 16%-plus it aimed for prior, helped by a mix shift in product sales and the licensing away of underperforming businesses. We plan to nudge our 18%-plus long-term operating margin forecast north but believe ongoing investment in innovation across the brand blueprint could intermittently bound potential upside in profitability. Hasbro also offered an expense reduction plan of $250 million-$300 million in annual run rate savings (5.5% of total costs). However, this plan comes at a cost of around $200 million between 2022-24, so we are unlikely to see progress until 2024.