Hasbro Gets Blindsided by Bank of America

Marketwatch ran this headline on November 15, 2022, “Hasbro is making too many ‘Magic: The Gathering’ cards, analyst says in downgrading stock. Here is a quote from the article:

An oversupply of Hasbro Inc.’s “Magic: The Gathering” cards is hurting the ecosystem for the fantasy trading-card game, “destroying the long-term value of the brand” and threatening sales, BofA analysts said in downgrading the stock on Monday.

Shares of the toymaker slid 9.2% during regular trading, putting the stock on pace for its biggest percentage decline since Oct. 26, 2020. Hasbro HAS, 4.41% was Monday’s worst performer in the S&P 500 Index.

Hasbro is making too many ‘Magic: The Gathering’ cards, analyst says in downgrading stock, Bill peters, marketwatch, november 15, 2022.

Bank of America’s position on Hasbro stock resulted in numerous headlines among business periodicals and fan websites. Here are two examples:

“Sell Hasbro Stock, BofA Says. The Company Is Killing Its ‘Golden Goose’ Game,” Barrons

“Bank of America says Hasbro could fall 34% due to company ruining ‘Magic: The Gathering’ card game,” CNBC.

The result of these headlines was for Hasbro’s stock to dive. On November 14, 2022, Hasbro’s stock price was $55.55, compared to a share price of $99.09 one year ago on November 15, 2021.

All of this has to be uncomfortable for Chris Cocks, who took over as CEO of Hasbro in January of this year. Why would Mr. Cocks be uncomfortable? Because He was formerly the President of the company’s Wizards of the Coast division from June 2016 to February 2022. Wizards of the Coast makes Magic the Gathering.

But here is my question: How accurate is Bank of America’s position on Hasbro? Bank of America’s outlook for Hasbro has an over-the-top feel to it. Is the situation really that dire?

To find out, I reviewed articles from the collector and fan side of the business. One piece that caught my eye was from MTG Rocks (MTG stands for Magic the Gathering). MTG Rocks is serious about Magic the Gathering and follows it for serious players and investors who invest in both old and brand-new cards. For many of them, the cards are an asset class.

Alex Atkin authored this MTG Rocks article, “MTG Players Praise Wizards Despite Hasbro’s Failings.” He reports that players and collectors have become progressively worried and frustrated by the number of new cards being released. Here is how he put it:

Looking back to just a few years ago, MTG (Magic the Gathering) players would be lucky to get one product a month. While not evenly spaced apart, this tempo to releases allowed players to get invested in a set, enjoy it, and then look forward to the next. In 2022, however, MTG players have been inundated with 25 different product releases across paper, Magic Online, and MTG Arena…To put this in perspective, if all of 2022’s product releases were to be evenly spaced apart throughout the year, players would be getting a new product every 4.4 days. 

“MTG Players Praise Wizards Despite Hasbro’s Failings, Alex Arkin, MTG Rocks

So some, maybe many, players and collectors have been unhappy. As author Alex Atkin points out, the challenge with this is that Bank of America based its position on conversations with the Magic the Gathering community. Because of that, he finds the Bank of America’s warning to be questionable. Here is how he puts it:

Obviously, the supposed death of Magic: the Gathering isn’t good news. However, it was precisely what players expected to hear. Reddit user u/Crulo, for instance, notes the “report reads exactly like a social media/influencer review of the state of magic.” As u/Inglonias highlights, however, that’s not surprising since MTG players were the ones being asked for their opinion. “Your conclusion may be that Bank of America agrees with the players that this is bad for the game because that’s who they went to for information on the subject,” u/Inglonias warns. This is ultimately circular reasoning creating a feedback loop of people claiming MTG is dying. In reality, MTG may be far healthier in the eyes of casual players, not to mention monetarily. 

“MTG Players Praise Wizards Despite Hasbro’s Failings, Alex Arkin, MTG Rocks

Mr. Atkins seems to be on solid ground with his reasoning. Hasbro may have a public relations problem with Magic the Gathering, but the problem may not be as serious as Bank of America states.