Hasbro is attempting to squeeze more money out of “Magic: The Gathering” fans within the short term, Bank of America says. That might hurt the long-term business. Analyst Jason Haas downgraded the toy stock to underperform from buy as recent changes to the “Magic” cards brand amount to Hasbro “killing its golden goose.” The analyst also slashed his price goal on the stock to $42 from $73. The brand new goal implies downside of 33.8% from Friday’s close. “The first 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,” he said in a note to clients. “Magic: The Gathering” is a trading card business that accounts for about 15% of Hasbro’s revenue and 35% of EBITDA after sales doubled through the pandemic on account of financial stimulus. The toy company has tried to capitalize on that demand by upping the number of recent releases and production volumes. But Haas said several players are getting increasingly turned off to latest releases amid unwelcomed changes from the corporate. He said the corporate is increasing releases for short-term financial gain with little care over how the brand will suffer long run. Players now feel like they cannot sustain with latest releases and are as an alternative playing a distinct version of the cardboard game where older cards might be used, he said. Seven of the last eight releases have declined in value by Bank of America’s count. National retailers have cut the brand or are increasingly focused on moving old inventory, in keeping with a Bank of America check of stores. That comes as retailers turn to promotions for a wide selection of products to try to maneuver gluts of inventory as consumers roll back spending on goods coming out of the pandemic. Haas also said he’s “concerned” by the corporate’s decision to release a thirtieth anniversary set that features 4 booster packs for $999. He said that’s “excessively” high in comparison with a standard set pack’s $5 price. Reprints can hurt the secondary-sale market since the packs include cards from the “Reserved List,” which is a bunch of cards Hasbro previously promised to never reprint. Some have argued its not a real reprint for the reason that anniversary cards can’t be utilized in tournaments, while others say it doesn’t matter because their existence will still drive down scarcity and, by extension, value. “This set has devalued many high-value cards, and collectors are concerned that Wizards will reprint more,” he said. Businesses and collectors would sometimes purposefully hold packs to sell later at higher price as demand outpaced supply, he said, but that system is now collapsing on account of production increases and the unexpected reprints. The mixture price of Reserved List cards peaked in mid 2021 at greater than $250,000, but is now all the way down to around $150,000. He said the changing secondary market could push card collectors to “Pokémon,” “Yu-Gi-Oh!” and “Flesh and Blood” as an alternative. Meanwhile, Haas said Hasbro could improve its outlook if it has a greater slate of releases next 12 months. The stock dipped 6.2% within the premarket. It’s down 37.7% this 12 months. Hasbro didn’t immediately reply to CNBC’s request for comment. — CNBC’s Michael Bloom contributed to this report.
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