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DA Davidson Cuts JAKKS Pacific Price Target After Disappointing Q1 EBITDA, Gross Margin Decline

DA Davidson Cuts JAKKS Pacific Price Target After Disappointing Q1 EBITDA, Gross Margin Decline

JAKKS Pacific, Inc. (NASDAQ: 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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Latest Ratings for JAKK

Oct 2018MaintainsNeutralNeutral
Apr 2018MaintainsHoldHold
Feb 2018MaintainsMarket PerformMarket Perform

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