TLDR: I think Hasbro is going to spike after its earnings report and I wanted to share why I think this.
Disclosure: as of right now, my financial interest in Hasbro comes from a dozen puts I sold Thursday morning when the price dropped below $63. Truth be told, though, I expect to buy back that put for a profit tomorrow or early next week before making my real move.
While I am not a fan of buying options (like many, I've lost money in the past doing so), in this situation I feel pretty strongly that my forecast that Hasbro will go up is correct. So I intend to buy a healthy amount of call options in Hasbro sometime next week.
The core reason? The premium Magic: the Gathering set release of Lord of the Rings. This is a Magic set using the IP of Tolkein's Lord of the Rings trilogy as a 'skin.' This is extremely nerdy, I know, but also... this is Reddit. Most of you probably are familiar with both Lord of the Rings (obviously) and Magic (to a lesser extent).
Now, this set was alway projected to do well so some of Hasbro's projected earnings already are baked in. That being said, I think those original projections are being outstripped by the popularity of the set and sustained market interest.
Background: Magic accounts for close to 70% of Hasbro's profitability (their Wizards of the Coast is credited with a full 70%, but it is important to note that Magic is Wizards). A strong spike in Magic sales will absolutely impact earnings per share. As of right now, Hasbro is projected to report earnings of $0.57 per share.
Most of the hype around this set has been due to a special one-of-a-kind card, The One Ring, which is serialized 1/1. It was only available in a premium product (Collector Box) that initially started at $350/box (there is another premium product it could be found in, but this is tangential to the main plot). There were publicly-declared offers for this card, the highest of which was $2.1 million USD.
Pre-orders on this box gradually grew more expensive, cracking $400/box and even $500/box before the premium One Ring was reported found last week. From there, the box price tanked back down to $350, but then a curious thing happened... the price rose to above $400 again. This was not expected by the vast majority of Magic players, collectors and investors.
Now, there are other cards that are serialized and, therefore, of high value (i.e., four-figures)--but none of these come close to the vale of The One Ring. There had been widespread speculation that once the The One Ring was found the Collector Boxes would tank and stay low, but that turned out to be wrong.
Overall, the prices and volumes of the set have remained very strong--including for boxes and bundles that are sold at lower price points, and which do not contain the super-rare chase cards. The Tolkein fanbase is considerably larger than Magic's fanbase (there is considerable overlap, of course) and the demand for the cards appears to be going strong--stronger than is typical for when demand is driven by the players alone.
Because Hasbro sells these products to distributors in advance, a significant percentage of this demand will be captured in the earnings report--both from the initial wave of orders, as well as from any second wave occurring in the weeks after the set released (which was in mid/late June).
Narrative: Hasbro routinely finds ways to proclaim a new set the "best-selling BLANK of all time": best-selling summer set, winter set, core set, commander set, etc. However, this time, they should easily be able to proclaim that this set is the best-selling Magic set of all-time.
Further, given that the price points for these cards are about 50% higher than regular set releases, the profits should be meaningful, even after accounting for what must be a hefty licensing fee paid to the Tolkein Estate.
Given that the set is still in demand and will be sold for a year or longer, Hasbro will be able to present a narrative of: 1) higher-than-expected EPS, 2) best-selling set of all time, and 3) the set continuing to have high demand for the foreseeable future. I think this is a pretty good recipe for a solid spike in stock price after earnings are report.
Submitted July 07, 2023 at 01:10AM by TiredTired99 https://ift.tt/c6yzeRA
