Hasbro Stock Tumbles After Bank Issues Warning About Magic: The Gathering

Hasbro's stock took an unexpected tumble this week after a Bank of America analyst issued a dire outlook about Magic: The Gathering's aggressive release schedule and strategy. Hasbro's stock slid nearly 10% on Monday after analyst Jason Haas downgraded Hasbro's stock outlook from "buy" to "underperform." The reason for this rare "double-downgrade" was due to a deep dive on Hasbro's recent strategy on its Magic: The Gathering releases. Surprisingly, Haas mirrored much of the recent criticism about Magic: The Gathering's recent releases, pointing out that the deluge of releases was flooding the market. "Hasbro is overproducing Magic cards which has propped up recent results," Haas wrote. "Card prices are falling, game stores are losing money, collectors are liquidating and large retailers are cutting orders."

While Magic: The Gathering currently makes up about 15% of Hasbro's overall sales and was recently touted as being Hasbro's first "billion dollar brand," Haas stated that the game's growth has not been because of an expansion of its player base, but rather by targeting existing players. "Magic has grown primarily by extracting more revenue from each player rather than by growing its player base," Haas stated.

One such example of this is the $999 30th Anniversary Set, which contains reprints of several rare "Restricted" cards such as the infamous Black Lotus card. "Not only is the price excessively high," Haas noted. "But the set also includes Reserved List cards which Hasbro had promised to never reprint. This has created panic among collectors and we're seeing collections being liquidated now that the scarcity value of Magic is in question."

Additionally, the cycle of releases has also increased significantly over the past three years. While a total of 15 Magic products (which includes core sets, supplemental sets, expansions, and special editions) were released in 2019, a whopping 39 sets were released in 2022. While a portion of the increases came from new digital exclusive sets sold only in MTG: Arena, much of the increases are due to an increase in "box sets," which seem to be Commander deck products.

It should be noted that the analysis seems a bit flawed, as Haas cites the Pokemon Trading Card Game and Yu-Gi-Oh as potential alternatives for Magic players looking to find a new system. While the research whitepaper cites the high traffic for Pokemon compared to Magic: The Gathering, Haas's research compares the whole Pokemon franchise to Magic: The Gathering. A Google Trends comparison of the Pokemon Trading Card Game to Magic reveals that Magic is still clearly the more popular game.

As of this morning, Hasbro's stock has rebounded slightly, although its stock price is down over 40% compared to the start of the year.