- JAKKS Pacific, Inc. (NASDAQ: JAKK) shares are down 19 percent in the last three months, declining steeply from a high of $10.16 on September 17.
- BMO Capital Markets’ Gerrick L. Johnson upgraded the rating on the company from Market Perform to Outperform, while raising the price target from $10.50 to $11.
- The stock seems undervalued and investor expectations are extremely low, while the company has beaten 3Q EPS consensus and issued in-line guidance, Johnson mentioned.
Analyst Gerrick Johnson said that JAKKS Pacific’s stock is currently trading at a significant discount to its historical average as well as to peers. He believes that the stock is undervalued and that investor expectations appear “extremely low.”
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JAKKS Pacific reported its 3Q15 EPS in-line with the BMO estimate, but $0.03 higher than the Street estimate. “Adjusting for one-time items and a low tax rate, we think comparable EPS results were actually $0.88,” Johnson added.
JAKKS Pacific maintained its EPS guidance for the full year, reflecting EPS in the range of $0.71-$0.75.
In the report BMO Capital Markets noted, “Although JAKKS is not getting a better multiple in the marketplace, we have been encouraged by its improving product line (with a new emphasis on building its own brands), better relationships with licensors and retailers, and solid execution.”
The retail checks remain positive, and the company is likely to be gaining share as well as benefitting from a robust toy market worldwide. This market is expected to “continue to perform well into 2016 and beyond,” Johnson wrote. The EPS estimate for 2016 has been raised from $0.85 to $0.90.
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