April 12, 2005: Brent Krott, 15, holds a hand of cards in a game called Magic the Gathering At Crossroad Games in Standish.
Gordon Chibroski/Portland Press Herald via Getty Images
Hasbro stock has 41% upside as its lineup of games has seen strong success in recent months, according to Bank of America.The company has seen solid success in its Magic: The Gathering expansion sets and the digital release of Baldur’s Gate 3.Hasbro also stands to benefit from the popularity of Monopoly Go, which has topped the charts in the Apple app store.
The bank reiterated its “Buy” rating and increased its price target to $90 from $85, representing 41% upside from Monday’s close. The stock surged more than 7% on Tuesday following the bullish note.
Bank of America’s conviction in Hasbro stems from the success it has seen in its Magic: The Gathering expansion sets, as well as the popularity of two recently launched digital games that it collects royalties from: Monopoly Go and Baldur’s Gate 3.
Magic: The Gathering has issued various expansion sets tied to big brands like Lord of the Rings. A Magic card from that expansion set, dubbed the “One Ring,” recently sold to musician Post Malone for millions of dollars.
Monopoly Go has topped Apple’s App Store for the top grossing game, and search interest for the game has surged following its release. According to data from Appfigures, Monopoly Go has generated $200 million in revenue since its mid-April launch.
Meanwhile, Dungeons & Dragons-based Baldur’s Gate 3 has already sold more than 2.5 million units since it was released on the PC earlier this month. The game will be released on the Playstation 5 early next month.
Bank of America estimates Hasbro could collect $60 million in royalties from Monopoly Go if it reaches $500 million in revenue in its first year, and $61 million in royalties from Baldur’s Gate 3 if it can sell 10 million units.
“These two games could materially contribute to earnings per share in [the] fourth quarter of 2023 through 2024,” BofA analyst Jason Haas said.
“We recently upgraded Hasbro to Buy on the strength of its Lord of the Rings Magic set. Hasbro has now seen two more successful releases, early wins for Hasbro’s Blueprint 2.0 strategy which focuses on fewer, bigger brands.”
And investors are not yet fully appreciating the recent, and likely continued, success of Hasbro, according to the note.
“We increasingly see risk skewed to the upside for 2024. We believe investors don’t fully appreciate Hasbro’s potential to generate high-margin licensing revenue from its strong IP library which includes Transformers, Power Rangers, GI Joe, My Little Pony, and many more,” Haas said.