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Hasbro (NASDAQ:HAS) Battleship vs. Hasbro / Marvel Avenger Toys

Currently Hasbro is in a win / win situation, movies that advertise their products are playing on screen one and screen two. However shares dropped from $34.30 to $33.42 yesterday morning then bounced right back up.


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Headlines about the new movie "Battleship," appear to have hit Hasbro's stock price:

hasbro headlines
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A Google (NASDAQ:GOOG) search shows there was one upbeat article about Hasbro's film, "Hasbro rides 'Battleship' wave," published in the Omaha World-Herald.:


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I can see it now, stock traders see the Forbes news flash, "Battleship,' Disaster Scuttles Hasbro's Plans For Board Games" and think "oh no," and sell big. Keep in mind there is no film review section in Forbes.

The Forbes article is by Abraham Brown, who is a staff writer. He admits that the film, "grossed $215 million.. (making it) a touch more tolerable." Though he does not mention whether he's seen the movie. 23,000 viewers rated it an average of 6.3 out of 10 stars.

Peter Traver's film review faults the movie for being Transformers brand entertainment, and claims the cast "gave up on acting." Then goes on to mention, as if totally irrelevant the fact that there was a solid performance by, "Army veteran Mick (real-life Iraq hero Gregory D. Gadson.)" The film also debuted popular singer Rihanna who did a (surprisingly) fine job.

Battleship shows former enemies working together, the film casts real WWII & Iraq veterans for an action packed tribute. It is a summer action film, nothing more and nothing less. Anyone who enjoyed Disney's (NYSE:DIS) "The Avengers" who would like to see another action film, should be entertained by Battleship.

Hasbro Financial Analysis

Board games may not easily translate to action films and unsuccessful films will not sell toys. However just as investors believed Disney's John Carter might offset earnings, one Hasbro project may not hurt the entire quarter, certainly not the entire year.

hasbro income source yahoo finance
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Notice the rise in cost of revenue compared to the gross profit.

  • The average increase in cost of revenue is 4.7% [ (8.6% + .8%) / 2) ]
  • The average increase in gross profit is 1.4% [ (-3% + 5.9%) / 2 ].
  • Notice just a 4% increase in Hasbro's cost of revenue this year would bring the total to $1.9B

Furthermore Universal Studios & Hasbro Entertainment financed the movie together; and it appears to be on track to recoup its budget and advertising. Battleship had a $209M budget and in the first weekend raked in $25M domestically and $226.8 million internationally. $250 million dollars world wide in the opening weekend is far from a 'disaster.'

Hasbro has $900M cash on hand and $1.57B in debt. The company makes Transformers, Tonka, GI Joe (with an upcoming film starring Bruce Willis,) Milton Bradley board games, Playskool and Nerf toys. Hasbro has paid a dividend since 1977 and currently pays 36 cents a quarter. Hasbro's next ex-div date is July 30th 2012.

Summary

If a movie or a toy fails, so be it. I saw the film and liked it better than The Avengers, because I had more expectations for Marvel's superhero blockbuster and didn't know what to expect of Battleship.

Simply put younger comic book fans will like Marvel characters and families who play board games should like Battleship. So it is a win/win for Hasbro's Marvel Avengers toys and their Battleship game.

There may be reasons to buy / sell or hold Hasbro, which has underperformed in the past year. However if the reason for any action is Battleship, take $7 bucks and go see the movie, it is a thoughtful and well intended action film.

Source: Hasbro's Battleship Signals $250M Worldwide