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BMO Downgrades Jakks Pacific On Valuation, Bad Risk/Reward

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In a report published Tuesday, BMO Capital Markets analyst Gerrick L. Johnson downgraded the rating on JAKKS Pacific, Inc. (NASDAQ: JAKK) from Outperform to Market Perform, while maintaining a price target of $10.

Jakks Pacific's shares have surged 48 percent year-to-date and fully reflect the company's product innovations and improved operational performance. Analyst Gerrick Johnson expressed optimism regarding Jakks Pacific's "business and outlook," while saying that there was "further upside" to the estimates.

However, given the recent surge in the company's shares, "we no longer feel the risk to reward relationship is favorable for new investor purchases," Johnson added.

Jakks Pacific's robust 2014 results were driven by strong shipments of Frozen license role-play and dress-up toys. In the report BMO Capital Markets noted, "While the company does not report Frozen sales, we believe toys and role play items tied to the movie accounted for almost $120 million in revenue in 2014, which we expect to decline to $30 million in 2015."

"Thus, we are forecasting "core" sales growth of +1%, although, given operational improvements, we are still looking for almost a doubling of core operating profit," Johnson wrote.

Johnson believes that Jakks Pacific has begun this year on a positive note, in view of its new product range. This momentum is expected to continue in the future, with the company's EPS estimated at $0.75 for 2015 and $0.80 for 2016.

Latest Ratings for JAKK

DateFirmActionFromTo
Dec 2016BMO CapitalDowngradesOutperformMarket Perform
Dec 2016PiperJaffrayDowngradesOverweightNeutral
Oct 2015BMO CapitalUpgradesMarket PerformOutperform

View More Analyst Ratings for JAKK
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Posted-In: BMO Capital MarketsAnalyst Color Downgrades Analyst Ratings

 

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