Is “Transformers” Boost Already Reflected in Hasbro Shares? (HAS, MAT)

Hasbro, Inc. (HAS-NYSE) has been a beneficiary of the upcoming "Transformers" movie coming on July 4.  The upcoming blockbuster film has been ‘in the can’ and ready to go for some time, and investors have run the stock up roughly 10% off of the lows over the last 6-months.  This may not seem like much of a run, but shares are up close to 90% in the last year.  This film release has also been a known commodity for some time.

Hasbro has owned this brand for years and it has become popular again with kids.  As far as products coming out, the company will have bedding, shirts, toys, video games, action figures, and more.    As far as the ‘next big thing’ TheStreet.com gave an interview with the head of Hasbro and the CEO said they have many more things coming down the road.

For whatever this is worth, the JULY07 $32.50 CALLS are at $0.70, so using a static picture and assuming only today’s trading you could infer that options traders do not expect the stock to rise above $33.20.  Of course that is very subjective and is not a perfect number since it is only representative of a snapshot in time, but it at least gives a bit of a guestimate as to what the rest of the trading world is thinking.  Even if you used a straddle pricing, you would determine on a static basis the stock would not fall below 31.95 nor rise above $34.05 based upon the event. 

As a reminder, Hasbro is a toy company and despite the "Transformers" movie, the quarter ending this week in June is usually considered the throw-away quarter for the sector (same for video game companies).  Its current P/E ratio is above 20 and based on consensus estimates of $1.85 EPS for fiscal 2007, it trades at roughly a 17.4 forward P/E. This is a premium to the largest competitor Mattel Inc. (MAT-NYSE): $10 Billion market cap; 17.5 trailing P/E ratio, and 15.9 forward P/E ratio.   Hasbro’s stock has had a 52-week trading range of $17.00 to $33.43. 

Jon C. Ogg
June 25, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.