Hasbro is trying to squeeze extra money from “Magic: The Gathering” fans in the short term, Bank of America said. This could hurt the business in the long run. Analyst Jason Haas downgraded the toy stock to underperform versus buy, as recent changes to the “Magic” card brand equate to Hasbro “killing its golden goose.” The analyst also cut his price target on the stock to $42 from $73. The new target implies a 33.8% decline from Friday’s close. “The main concern is that Hasbro has overproduced Magic cards, which has supported Hasbro’s recent results but destroyed the long-term value of the brand,” he said in a note to customers. “Magic: The Gathering” is a collectible card business that accounts for about 15% of Hasbro’s revenue and 35% of EBITDA after sales doubled during the pandemic due to financial stimulus. The toy company attempted to capitalize on this demand by increasing the number of new releases and production volumes. But Haas said several gamers have been growing reluctant to new releases amid unwanted changes from the company. He said the company was increasing releases for short-term financial gain without worrying about how the brand would suffer in the longer term. Players now feel like they can’t keep up with newer versions and instead play a different version of the card game where older cards can be used, he said. Seven of the last eight releases have lost value according to Bank of America’s tally. National retailers have reduced branding or are increasingly focusing on moving old inventory, according to a store audit by Bank of America. It comes as retailers turn to promotions for a wide range of products to try to move a glut of inventory as consumers cut spending on goods emerging from the pandemic. Haas also said he was “concerned” by the company’s decision to release a 30th anniversary set that includes four boosters for $999. He said it was “excessively” high compared to the $5 price of a normal pack. Reprints can hurt the secondary sale market, as the packs include cards from the “reserved list,” which is a group of cards that Hasbro previously promised never to reprint. Some have argued that it’s not a true reprint since birthday cards can’t be used in tournaments, while others say it doesn’t matter as their existence will always reduce rarity and, by extension, value. “This set has devalued many high-value cards, and collectors fear Wizards will reprint more,” he said. Businesses and collectors sometimes deliberately held packs to sell later at a higher price as demand exceeded supply, he said, but that system is now collapsing due to rising production and unexpected reprints. The total price of reserved list cards peaked in mid-2021 at over $250,000, but has now fallen to around $150,000. Haas said the evolution of the secondary market could push card collectors toward “Pokémon,” “Yu-Gi-Oh!” and “Flesh and Blood” instead. He said Hasbro could improve its prospects if it had a better release slate next year. The stock fell 6.2% premarket. It is down 37.7% this year. Hasbro did not immediately respond to CNBC’s request for comment. – CNBC’s Michael Bloom contributed to this report.
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