Walt Disney just bought Lucasfilm and its Star Wars franchise for $4 billion. Investors clearly have mixed emotions about the deal, as Disney’s stock is down 2% this morning. But one company that could see strong gains is Hasbro (HAS), notes Needham Research analyst Sean McGowan.
“We believe Star Wars has been the most successful entertainment license in the history of the toy industry,” McGowan says, noting that Hasbro has held the license on the toys since 1991 and retains those rights through 2020...
And with a new Star Wars movie scheduled to be released in 2015, the toys could get another boost.
“We believe the deal could have significant benefit for Hasbro, which holds the rights to make a range of Star Wars toys through 2020. Star Wars has, over the past 35 years, been one of the toy industry’s most valuable franchises. There has not been a new full length live action feature since 2005, and in that year, Hasbro’s sales reached almost $500 mm. Since then, sales have been steady, but lower. Disney plans to release Episode VII, an all new Star Wars film in 2015, and at least two additional Star Wars films after that. We believe this gives significantly greater visibility to Hasbro’s growth potential beyond 2014. We maintain our Hold rating based on near-term concerns, but acknowledge that a revived Star Wars franchise brightens the outlook considerably.”