According to Bank of America, Hasbro is on a dangerous path of destroying the customer loyalty it has earned through its Magic: The Gathering card game. The bank has reiterated its “Underperform” rating for Hasbro and has set a $42 price target, suggesting that the stock could experience a significant decline of 29% if Hasbro continues to “destroy customer goodwill.”
The bank is especially cautious about Hasbro’s Wizards segment, given the over-monetization of Magic: the Gathering.
Hasbro’s over-monetization of the brands within its Wizards segment, which includes Magic: The Gathering and Dungeons & Dragons, has been a major point of concern for Bank of America. The company is attempting to maximize its short-term profits without considering the long-term health of its brands. This approach is irking customers, who are becoming increasingly frustrated with Hasbro’s tactics.
Despite pre-announcing negative earnings, the stock remains not de-risked, given the host of outstanding issues, according to Bank of America. The bank is especially cautious about Hasbro’s Wizards segment, given the over-monetization of Magic. The recent attempt to change its 20-year-old open game license for Dungeons & Dragons led to a significant backlash from customers, which resulted in Hasbro dropping its proposed changes.
Bank of America’s analysts have spoken with players, collectors, distributors, and local games stores and have become aware of the growing frustration among Magic players. Hasbro’s overproduction of Magic cards has propped up its recent earnings results but is destroying the brand’s long-term value. The oversupply of Magic cards is resulting in falling card prices, game stores losing money, collectors liquidating, and large retailers cutting orders.
If Hasbro continues to dilute the value of its popular brands, it faces a steep decline in its share price.
The bank identifies “weak fan engagement with Hasbro’s brands” and “fading appetite for Magic releases” as key downside risks for the stock. Hasbro’s management is willing to risk customer loyalty for short-term profit, and the snafu by Hasbro regarding Dungeons & Dragons validates Bank of America’s view. If Hasbro continues to dilute the value of its popular brands, it faces a steep decline in its share price.
