Why Hasbro’s Outperformance Over 2008 Recession Bodes Well For Its Outlook

by Trefis Team
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Hasbro (NASDAQ:HAS), best known for its toys and board games, has seen its stock decline by about 30% from $97 at beginning of the year to $73 currently, underperforming the broader indices, as several retail stores are temporarily closed due to the coronavirus pandemic. That said, the stock could recover strongly as lockdowns in the U.S. ease, with customers potentially making purchases, especially before the holiday season. A detailed comparison of Hasbro’s performance vis-à-vis the S&P 500, and its stock price performance compared to the 2008 crisis is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Hasbro Stock Fare Compared With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. Hasbro stock lost 47% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 43% over recent weeks (vs. 30% gain in the S&P 500) to its current level of $74.

Hasbro Stock Fell Considerably Due To Closure of Stores, And Lower Discretionary Spending Through Pandemic

Several malls and retail stores have been closed since March 20 as the pandemic impacts Hasbro’s sales. While the economy is opening up as of early May, the company could face headwinds in the near-term as consumers may forego toys and other discretionary items and focus on buying necessities, such as groceries and medicines.

We believe Hasbro’s Q2 results in July will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by the Q2 earnings timeframe, it’s likely Hasbro stock is going to see a continued drop if results confirm reality.

Hasbro Outperformed Through The 2008 Downturn

Hasbro’s stock outperformed the broader markets through the great recession of 2008-2009. Between the pre-crisis market peak of October 2007 and the approximate market bottom in March 2009, the stock was down 20%, compared to the broader S&P which was down by about 51% over the same period. This was likely due to the fact that the company continued to grow its earnings through the downturn, led by margin expansion, and strong demand for Transformers and Marvel characters toys.

Will Hasbro Stock Recover Strongly From The Current Crisis?

Keeping in mind the fact that Hasbro stock fell 47% from the market peak on February 19 to the low on March 23 compared to the 20% decline during the 2008 recession, we believe it can potentially recover by another 30% to levels of $97, once economic conditions begin to show signs of improving. This marks a full recovery to the $97 level Hasbro stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. The complete set of coronavirus impact and timing analyses is available here.

Also see, Why Is Hasbro’s Stock Up 20% While Its Sales Are Down 10%?

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