Bank of America turned negative on Hasbro ( NASDAQ: HAS ) on Monday with a double downgrade after conducting a deep dive into the Magic: The Gathering business.
The firm said it has spoken with several players, collectors, distributors and local games stores and have become aware of growing frustration with the trading card game that accounts for roughly of 15% of Hasbro's revenue and 35% of its EBITDA. Analyst Jason Haas noted that the primary concern it heard was that Hasbro ( HAS ) has been overproducing Magic cards which has propped up recent earnings results, but is destroying the long-term value of the brand.
"Seven of the last eight major Magic releases have declined in value, and Hasbro continues to reprint its most successful sets, driving prices down further. Our store checks have also found that many national retailers are cutting Magic, and those that continue to carry it are heavy with aged inventory."
BofA downgraded Hasbro ( HAS ) to an Underperform rating from a prior rating of Buy and assigned a price objective of $42.
Shares of Hasbro ( HAS ) fell 5.38% in premarket trading to $60.00 vs. the 52-week trading range of $57.58 to $105.73.
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Hasbro slides after double downgrade from BofA to bearish rating