Hasbro: Improving Focus and Mix Render Shares Attractive and Support Profit Expansion

Narrow-moat Hasbro’s shares have struggled to gain footing in 2024, trading flat through the end of February and underperforming the Morningstar Global Markets Index’s return of 5%. We view shares as significantly undervalued relative to our $84 fair value estimate and contend the weak performance is reflective of a business in transition that has faced idiosyncratic risks in 2023, such as slower entertainment growth from the writers' strike and the overhang from the pending sale of the majority of the EOne production business (completed December 2023). With Hasbro now largely liberated from the low-margin EOne entertainment segment, we expect solid lift from an improved revenue mix, with the high-margin Wizards of the Coast and digital segment set to represent around 35% of sales in 2024 (from 29% in 2023).