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JAKKS Pacific (JAKK) Stock Gains on Just Play's Buyout Offer

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Per media report, JAKKS Pacific, Inc. (JAKK - Free Report) is likely to be acquired by its rival Just Play. The deal is backed by private equity firm Centerbridge Partners. Per the source close to the matter, the deal is likely to be inked by the end of October. Following the news, shares of JAKKS Pacific surged 8.4% on Oct 9.

In the previous month, Stephen Berman, CEO and co-founder of JAKKS Pacific, said that “We remain committed to executing our business plan in the months and years ahead. At the same time, however, the company is exploring the alternative transactions described in this announcement.”

A glimpse of the company’s price performance in a year’s time shows that it has underperformed the industry. Shares of JAKKS Pacific have lost 67.2% compared with the industry’s 17% decline. This dismal performance can be attributed to the company’s lower-than-expected earnings in six of the trailing seven quarters.



This apart, JAKKS Pacific witnessed average four-quarter earnings miss of 40.4%. In the second quarter of 2019, the company incurred adjusted loss of 83 cents per share, wider than the Zacks Consensus Estimate of a loss of 44 cents. The company incurred a loss of 72 cents per share in the prior-year quarter.

Moreover, ever since the liquidation of Toys "R" Us the problem for JAKKS Pacific has intensified. Also, toy manufacturers have to battle a broad array of alternative modes of entertainment including video games, MP3 players, tablets, smartphones and other electronic devices. JAKKS Pacific’s revenues have been under pressure over the past few quarters due to lower demand for games as children are opting for electronic versions of games on smartphones and tablets.

In an effort to bring the company back on track the management continues to focus on acquisitions, solid international footprint, innovations, and collaborations with popular brands and movie franchisees. However, these efforts failed to yielded satisfactory results.

Zacks Rank & Key Pick

JAKKS Pacific, which shares space with Mattel, Inc. (MAT - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) , has a Zacks Rank #3 (Hold). A better-ranked stock worth considering in the same space includes Hasbro, Inc. (HAS - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hasbro has an impressive long-term earnings growth rate of 10.7%.

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