It's real annoying that I found the actual report a few days back, but now I can only find tertiary sources.
https://articles.starcitygames.com/magic-the-gathering/hasbro-shares-plunge-after-bank-of-america-report-downgrades-companys-rating/https://www.investing.com/news/stock-market-news/magic-the-gathering-analysis-prompts-bofa-to-double-downgrade-hasbro-432SI-2943159https://www.cnbc.com/amp/2022/11/14/stocks-making-the-biggest-moves-in-the-premarket-hasbro-oatly-advanced-micro-devices-and-more.htmlHasbro is trying to squeeze extra money out of “Magic: The Gathering” fans in the short term, Bank of America says. That could hurt the long-term business. Analyst Jason Haas downgraded the toy stock to underperform from buy as recent changes to the “Magic” cards brand amount to Hasbro “killing its golden goose.” The analyst also slashed his price target on the stock to $42 from $73. The new target implies downside of 33.8% from Friday’s close. “The primary concern is that Hasbro has been overproducing Magic cards which has propped up Hasbro’s recent results but is destroying the long-term value of the brand,” he said in a note to clients. “Magic: The Gathering” is a trading 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 has tried to capitalize on that demand by upping the number of new releases and production volumes. But Haas said several players are getting increasingly turned off to new releases amid unwelcomed changes from the company. He said the company is increasing releases for short-term financial gain with little care over how the brand will suffer longer term. Players now feel like they can’t keep up with new releases and are instead playing a different version of the card game where older cards can be used, he said. Seven of the last eight releases have declined in value by Bank of America’s count. National retailers have cut the brand or are increasingly focused on moving old inventory, according to a Bank of America check of stores. That comes as retailers turn to promotions for a wide range of products to try to move gluts of inventory as consumers roll back spending on goods coming out of the pandemic. Haas also said he is “concerned” by the company’s decision to release a 30th anniversary set that includes four booster packs for $999. He said that is “excessively” high compared to a normal set pack’s $5 price. Reprints can hurt the secondary-sale market because the packs include cards from the “Reserved List,” which is a group of cards Hasbro previously promised to never reprint. Some have argued its not a true reprint since the anniversary cards cannot be used in tournaments, while others say it doesn’t matter because their existence will still drive down scarcity and, by extension, value. “This set has devalued many high-value cards, and collectors are concerned that Wizards will reprint more,” he said. Businesses and collectors would sometimes purposefully hold packs to sell later at higher price as demand outpaced supply, he said, but that system is now collapsing due to production increases and the unexpected reprints. The aggregate price of Reserved List cards peaked in mid 2021 at more than $250,000, but is now down to around $150,000. He said the changing secondary market could push card collectors to “Pokémon,” “Yu-Gi-Oh!” and “Flesh and Blood” instead. Meanwhile, Haas said Hasbro could improve its outlook if it has a better slate of releases next year. The stock dipped 6.2% in the premarket. It’s down 37.7% this year. Hasbro didn’t immediately respond to CNBC’s request for comment.
So let me preface this by saying that stock price is not a great representation of a company's success. It can be indicative at times, but it can also be manipulated by good or bad press. I'm sure we all remember the GameStop incident in early 2021. Case in point, right after the above report was published, Hasbro's stock dipped even more.
The report itself seems to finally say what we've all been saying for a while now; the over-saturation of product is causing wallet-fatigue. People just don't want to spend money on magic anymore, let alone $1000 USD for the 30 year collector pack, which are effectively proxies.
All of this comes after the Q3 financial report, which reported a decrease in sales from the previous year.
https://hasbro.gcs-web.com/news-releases/news-release-details/hasbro-reports-third-quarter-financial-resultsWhat does this mean for us?First off, let's get this
out of the way; the game is not dying. Far from it. There are more magic players now than ever before, with an estimated 40 million players worldwide. It's still in a good spot, for now. This just means that Wizard's of the coast are going to need to modify their current market plan from pushing product non-stop to something more lax.
Second, there is a concern for the viability of this game in the long term. Anyone that knows even a little bit about marketing knows that the current
overload of releases is unsustainable. Wallet
fatigue is a real thing. For a while, I thought that Hasbro was going to try and sell-off Magic. Pumping out all of this product in the short term would inflate the company's perceived worth, which would sell it at a higher price. If that was the plan though, that ship may have sailed.
Third, expect a lot of older players to switch away from Magic to other hobbies. Whether this is permanent or temporary is completely up to them. You may have seen it start already. When's the last time any of us heard from WizardSpartan, Marshstepper78, or DelverMage?
To close this all off, while Magic is currently falling in profitability, things usually uptick in Q4's holiday season. Hasbro is expecting to bounce back from this quarter, but only time will tell. We just have to wait, spend our money wisely, and always pay the 1.
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