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JKKS Pacific Case Study

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JKKS Pacific Case Study
JAKKS Pacific (JAKK), a Malibu, Calif.-based toymaker, has hit a rough patch in recent year. After hitting a multi-year low last October, the stock rebounded to $9 price levels in April this year. But, then, lost most of its gains after the company reported a soft bottom line improvement in the second quarter.

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Notwithstanding those who might think the bearish trend in the stock would continue, below I highlight the reasons why investors should look to buy the stock at current levels.

Toymaker has finally turned the corner
The award-winning licensee of several popular trademarks announced narrower year-over-year losses for the first and the second quarter of 2014.

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On May 23, 2014, JAKKS reported …show more content…
Not only will this strategic partnership provide JAKKS the opportunity to leverage a top girls brand across a variety of toy lines, including miWorld and Cabbage Patch Kids, but also help the company to gain market share in the competitive industry. Additionally, the company’s partnership with Nickelodeon, Cabbage Patch Kids, Disney and Saban Brands for the popular Power Rangers line is forecast to help its top line in the near …show more content…
As illustrated in the chart above, the stock was trading under $5.23 a share with nearly 85 percent of its float sold short in February. In March, the shorts rapidly exited their positions and the stock rose 69 percent in value to $8.84 a share in just a month. Given the continuously rising short interest and improving fundaments, JAKKS Pacific is fated to face a similar short squeeze anytime soon.

Looking forward: Fall offerings & guidance upgrade
The Frozen line was an important highlight of the company’s second quarter sales. The Disney’s massive box office success was much more popular than anticipated and kept parents racing to score pretty much anything that was “Frozen”-themed this year. Looking ahead, the company expects the demand to continue at retail for its new Frozen merchandize.

The company also anticipates strong demand for the Disney licensed dolls, dress up and role play including Princess, Fairies and Sofia the First, Disguise Halloween costumes and its preschool foot-to-floor ride-ons and ball pits. For Boys, the company is looking forward to launching large-scale figures such as Teenage Mutant Ninja Turtles and Star Wars Rebels, new Hero Portal Plug It In & Play TV Games titles, and Max Tow Truck
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