On Jun 6, 2014, we issued an updated research report on
JAKKS Pacific, Inc.
We believe the toymaker is poised to grow after it announced
narrower year-over-year losses for the first quarter on May 23.
Losses of 74 cents per share were also narrower than the Zacks
Additionally, the company's revenues increased approximately 5.7%
year over year and beat the Zacks Consensus Estimate by 10%. Higher
sales in the quarter were driven by dolls section; dress-up and
role play in the company's Frozen product line-up, Disney Pirate
Fairies dolls and dress-up, and pre-school foot-to-floor ride-ons
We are encouraged by JAKKS Pacific's string of acquisitions over
the past several years. The acquisitions of Maui, Inc. in Jul 2012
and JKID, Ltd. in Sep 2012 have already added to the top line and
are expected to boost it further in the upcoming quarters. Also,
the company's joint ventures with Pacific Animation Partners and
NantWorks LLC (in Sep 2012) will further boost the top line.
In May 2014, the company inked a long-term licensing agreement with
California-based leading lifestyle footwear manufacturer
Skechers USA Inc.
) to manufacture a series of toys and products inspired by the
Skechers brand, and its children's footwear brand Twinkle Toes. In
our view, such innovative partnerships will help JAKKS to gain
market share in the competitive industry. Further, the company's
partnership with Disney, Nickelodeon, Cabbage Patch Kids and Saban
Brands for the popular Power Rangers franchise is expected to boost
the top line in the near term.
We are also positive on JAKKS Pacific's efforts to cut costs and
introduce innovative tech-based products. The company's newly
launched mobile gaming apps and Blu-ray DVDs as well as the Hero
Portal gaming console (to be launched in Sep 2014) will help in
brand building apart from capitalizing on the increasingly
lucrative technology-based gaming market.
However, we are aware of the consumer spending uncertainty, which
still lingers amid sluggish economic growth as U.S. customers curb
their non-essential purchases. In addition, the toy manufacturers
have to battle a broad array of alternative modes of entertainment
including video games, MP3 players, tablets, smartphones and other
electronic devices, which are gaining popularity among children and
therefore cannibalizing their market share.
JAKKS Pacific currently has a Zacks Rank #3 (Hold). Better-ranked
stocks in the same industry are
Electronic Arts Inc.
Activision Blizzard, Inc.
). While Electronic Arts sports a Zacks Rank #1 (Strong Buy),
Activision Blizzard has a Zacks Rank #2 (Buy).
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JAKKS PACIFIC (JAKK): Free Stock Analysis
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