Some distressing news has greeted Hasbro today. The parent company behind Magic: The Gathering have recently been celebrating the franchise's 30th anniversary through special events, commemorative promo packs, as well as heavy promotion for their newest set. But a new financial deep dive by Bank of America has lead to a decline in Hasbro's stock. The main reason for this is overproduced Magic cards.
Hasbro Has Overproduced Magic
The results of Bank of America's deep dive on Hasbro and overproduced Magic was made public in a news report by Investing.com. The report included reaching out to several Magic: The Gathering players, card collectors, distributors and local game stores. The feedback from these sources was growing frustration. According to analyst Jason Haas, "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." Haas states that these frequent releases has lead to players not bothering with the new material and switching to the game's Commander format, allowing for older cards to be used.
Since players aren't buying, the excess of stock is leading to loss of profits for distributors and game stores. The increased supply has also lead to crashed secondary market prices and collector prices since the volume of cards has substantially changed the scarcity of sought after cards. Haas also commented on the Magic 30th Anniversary packs, the $1000 box of proxy cards, stating that the price point was "excessively high."
Seeking Alpha also cited Haas' report, which provided the following illustrative quote about overproduced Magic products:
Seven of the last eight major Magic releases have declined in value, and Hasbro continues to reprint its most successful sets, driving prices down further. Our store checks have also found that many national retailers are cutting Magic, and those that continue to carry it are heavy with aged inventory.
As a result of this report, Bank of America's analysts have double downgraded Hasbro's stock from Underperform to Buy. This has caused the company's stock to decline 6% in premarket trading, their price dropping from $72 per share to $42. This is due to the fact that Magic: The Gathering generates 15% of Hasbro's revenue.
