'Magic: The Gathering' Works Wonders For Hasbro - Hasbro (NASDAQ:HAS)

Hasbro, Inc. HAS surprised Wall Street with a first-quarter earnings beat Tuesday, finding some magic in a new esports version of an old game, “Magic: The Gathering.”

The beat helped convince sell-side analysts that the disruption caused by the Toys R Us closure is over and CEO Brian Goldner’s turnaround is looking good.

Pawtucket, Rhode Island-based Hasbro reported first-quarter earnings of 21 cents per share, nearly double the 11-cent Street estimate, showing unexpected profits when the company had led analysts to expect a small loss.

Hasbro’s stock jumped more than 14 percent on Tuesday and is up nearly 25 percent on the year.

The Analysts

Davidson’s Linda Bolton Weiser maintained a Buy rating on Hasbro and raised the price target from $103 to $120.

MKM’s Eric Handler maintained a Buy and raised the price target from $102 to $112.

DA Davidson

“The Toys ‘R’ Us impacts are now over and we expect momentum to build,” Bolton Weiser said in a Wednesday note.

But it may be a totally new “arena” for Hasbro that has analysts most excited.

The new e-sports version of the “Magic the Gathering” card game is turning out to be a big hit for Hasbro’s entertainment, licensing and digital division, which saw net revenue increase by 24 percent in the first quarter.

The game is already No. 8 in esports, Bolton Weiser said.

MKM

Expectations in the quarter were for a 7-percent top-line decrease, but revenue was up 2 percent overall, thanks in part to Hasbro's digital success, Handler said in a Wednesday note.

Hasbro showed strength in retail sales over the Easter weekend and improved profitability in Europe, and cost-saving initiatives are bearing fruit, the analyst said.

“In our view, the combination of a strong product pipeline and management's cost savings initiatives could steadily push our forecast even higher as the year progresses."

CEO's Take

Hasbro CEO Goldner was on CNBC Wednesday and pointed to international success as a key component of the toymaker's turnaround, along with the new esports moves.

“We’re seeing some great progress in our international markets,” Goldner said. “Our European business has moved ahead. We expected to see a turnaround in international markets and they were up.”

There’s more coming in the digital space, too, he said.

“We’ll roll 'Magic Arena' out around the world,” Goldner added. “You’ll see a number of new events and esports initiatives and new digital initiatives.”

Price Action

Hasbro stock was trading up 2.74 percent to $103.41 at the time of publication Wednesday.