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LAS VEGAS - JUNE 17 : The Hasbro booth at the Licensing Expo in Las Vegas , Nevada on June 17 2014. Licensing Expo is the licensing industry's largest annual event

Hasbro, Inc. (HAS) shares plunged 7.41% Monday after the toy and boardgames maker missed Wall Street’s top- and bottom-line expectations. The Rhode Island-based company reported second-quarter (Q2) adjusted earnings of 2 cents per share, falling well short of analysts’ forecast of 19 cents per share. The figure also contracted 96% from the year-ago quarter. Meanwhile, revenue of $860.3 million in the period came in below the consensus mark of $983 million and declined 29% year-over-year (YoY).

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CEO Brian Goldner cited COVID-19-related disruptions to the company’s supply chain and the closures of retailers selling its toys as contributing factors to the disappointing quarterly result. Still, he sees things improving in the second half. “We believe the outlook improves from here,” Goldner told investors during the conference call, per Barron’s. The CEO also believes the reopening of the television, film, and entertainment industries position the company for a good holiday season.

As of July 28, the company has a market capitalization of $9.84 billion, offers an enticing 3.51% dividend yield, and is down 30.69% on the year. From a valuation standpoint, the stock trades at 22.37 times projected earnings, 14% above its five-year average multiple of 19.58 times.

Balance Sheet Position

Even though Hasbro’s cash position has decreased slightly from a year ago, it still has a stockpile of $1.04 billion and access to a $1.5 billion credit facility to help navigate challenges in the months ahead. The company’s long-term debt has risen to $4.8 billion from $1.7 billion, with $300 million due in May 2021.

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Wall Street View

Wells Fargo analyst Timothy Conder told clients Monday that he believes the earnings and revenue miss will erase some of the stock’s recent gains. However, Street ratings indicate further upside. The stock receives 10 ‘Buy’ recommendations, 1 ‘Overweight’ recommendation, and 6 ‘Hold’ recommendations. Moreover, analysts have placed an $86.69 12-month price target on the stock, indicating a 12% upside from Monday’s $77.59 close.

Technical Outlook

After making an impressive recovery throughout March and April, Hasbro shares have oscillated within a symmetrical triangle. Yesterday’s earnings miss saw sellers rush for the gates, with price breaking down below the pattern’s lower trendline on above-average volume. Furthermore, the moving average convergence divergence (MACD) indicator crossed below its trigger line to generate a sell signal. In the weeks ahead, look for a possible test of $62.50, where price finds support from the mid-May swing low. Conversely, a reversal back to the upside could drive a move back to significant overhead resistance around $94.

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