Introduction
The share price of Hasbro (HAS) has undergone a correction in the past two months, ostensibly due to some profit-taking after it hit an intra-day record high on July 21st, the last trading day before its Q2 results announcement. While it has rebounded somewhat, the last closing price ($98.34) is still 15.4% lower than the peak achieved less than two months ago. The fall pales in comparison with Mattel's (MAT) 23.8% decline in the same period. Nevertheless, this has to factor in the earnings beat at Hasbro versus the earnings disappointment at Mattel, and the apparently brighter prospects at Hasbro compared to Mattel in the coming quarters. For years, the share price of Hasbro had generally reached the consensus price target after dipping. In the past month, however, it dropped sharply below the prevailing consensus target at $109.77. While this is not a fool-proof indication of undervaluation, it piqued my interest to investigate whether the correction of this magnitude is justified. In the subsequent sections, I explain why the sell-down appears overdone.
HAS data by YCharts
