Jakks Pacific Has The Products, So Buy It: Oppenheimer

Oppenheimer analyst Sean McGowan said that product breadth appeared to be improving at

, despite difficult frozen comps. McGowan initiated coverage of the company with an Outperform rating and a price target of $15. JAKKS Pacific would be facing tough comps over the year, given the robust sales of Frozen merchandise. The company's sales in 1H grew nearly 19 percent, mostly driven by high sales of Frozen toys. McGowan commented that although there could be weakness in the second half, this "belies the fact that in recent years, in our view, JAKK has developed a stronger, more diversified product line." Profit margins would be "considerably" higher this year, more than offsetting the sales decline, resulting in EPS and EBITDA growth. In the report Oppenheimer noted, "Outside of Frozen, the company has a solid line of basics such as role-playing toys, licensed kids' furniture, Halloween costumes, outdoor yard and pool toys, foot-to-floor ride-ons, and a host of toy products featuring many popular licenses, especially from Disney (including Star Wars and Marvel)." Given the "emergence of greater diversity in its product line," the company's sales growth can be expected to resume in 2016. While near term concerns over Frozen had "created an excessive discount," McGowan said that these could be expected to "dissipate" over the next year, boosting JAKKS Pacific's shares by "50% or more."