While toys sell throughout the year, the holiday season tends to see the biggest volume of sales. That’s a boon to toy makers in general. So it’s no surprise that this sector is seeing a holiday upgrade, courtesy of analysts at Citigroup.
But the analysis has one key trend this year. Toy making has gone beyond simply manufacturing physical products. It also involves being in the entertainment industry, integrating its toys with intellectual property and technologies to create a bigger experience.
With that development underway, Hasbro (HAS) looks like the big winner here. That’s because the company has a partnership on toys with Walt Disney to tie in its multitude of products in the digital age.
Shares of Hasbro are down 10 percent over the past year. Shares aren’t cheap at 20 times forward earnings, but with double-digit revenue growth ahead of the holiday season, shares have plenty of room to surprise to the upside.
Action to take: Investors may like shares, given the 3 percent dividend yield at current prices.
For traders, the January 2021 $90 calls are the at-the-money trade. Carrying a bid/ask spread of about $4.10, the option could deliver solid returns in the next few weeks as holiday sales numbers come in. The next date out for the options is April, which would cost traders a lot more in time premium, but would also allow time for the final fourth quarter sales numbers to come in.