JAKKS Pacific, Inc. JAKK missed first-quarter EBITDA expectations last week — mainly due to a sharp decline in gross margins — and reduced its full-year EBITDA guidance, according to D.A. Davidson.
The Analyst
Linda Bolton Weiser maintained a Neutral rating on JAKKS Pacific and lowered the price target from $1.50 to $1.
The Thesis
JAKKS Pacific reported quarterly sales of $71 million on May 9, representing a 24-percent decline and short of the consensus estimate of $76 million.
The miss was far worse on the EBITDA front, with a negative $17.1-million figure versus the consensus estimate of negative $12.8
The miss was driven by higher inventory obsolescence that affected the company’s gross margins, Bolton Weiser said in a Tuesday note. (See her track record here.)
JAKKS Pacific lowered its 2019 EBITDA guidance from $27 million to $22 million, projecting continuing gross margin pressure in the second quarter.
D.A. Davidson reduced its 2019 EBITDA estimate from $27 million to $22.3 million.
About 27 percent of sales for the year are expected to occur in the first half of 2019, implying a second-quarter sales decline of about 15 percent, Bolton Weiser said.
Price Action
Shares of JAKKS Pacific rose close to 3 percent to $0.93 at the time of publishing on Tuesday morning.
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